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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">As filed with the Securities and Exchange
Commission on September 14, 2012</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C.&nbsp;&nbsp;20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">_______________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BOOMERANG SYSTEMS, INC. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(<I>Exact name of registrant as specified
in its charter</I>)</P>

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    <TD STYLE="width: 32%; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 32%; font-weight: bold; text-align: center">3510</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 32%; font-weight: bold; text-align: center">22-2306487</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-style: italic; text-align: center">(State or other jurisdiction of</TD>
    <TD STYLE="font-style: italic; text-align: center">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">(Primary Standard Industrial</TD>
    <TD STYLE="font-style: italic; text-align: center">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">(I.R.S. Employer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-style: italic; text-align: center">incorporation or organization)</TD>
    <TD STYLE="font-style: italic; text-align: center">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">Classification Code Number)</TD>
    <TD STYLE="font-style: italic; text-align: center">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">Identification No.)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>30 B Vreeland Road</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Florham Park, New Jersey 07932</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(973) 538-1194</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Address, including zip code and telephone
number, including area code, of Registrant&rsquo;s principal executive offices)</I></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Mark Patterson</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Chief Executive Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>30 B Vreeland Road</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Florham Park, New Jersey 07932</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(973) 538-1194</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Name, address, including zip code and
telephone number, including area code, of agent for service)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Robert J. Mittman</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Brad L. Shiffman</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Blank Rome LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Chrysler Building</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>405 Lexington Avenue</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Telephone: (212) 885-5442</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Facsimile: (212) 885-5001</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Approximate date of commencement of
proposed sale to the public:</B>&nbsp;&nbsp;As soon as practicable after this registration statement becomes effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.&nbsp;<FONT STYLE="font-family: Wingdings"><B>&thorn;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.&nbsp;<FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.&nbsp;<FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2
of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 50%">Large accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;&nbsp;&nbsp;</TD>
    <TD STYLE="width: 50%">Accelerated filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;</TD></TR>
<TR>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-accelerated filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(Do not check if a smaller reporting company)&nbsp;&nbsp;</P></TD>
    <TD>Smaller reporting company&nbsp;<FONT STYLE="font-family: Wingdings">&thorn;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Calculation of Registration Fee </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Title&nbsp;of&nbsp;Each&nbsp;Class<BR> of&nbsp;Securities&nbsp;to&nbsp;be<BR> Registered</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount&nbsp;to&nbsp;be<BR> Registered</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed&nbsp;Maximum<BR> Offering&nbsp;Price&nbsp;Per<BR> Share(1)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed&nbsp;Maximum<BR> Aggregate&nbsp;Offering<BR> Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount&nbsp;of<BR> Registration&nbsp;Fee</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; text-align: left">Convertible Notes</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">6,200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">6,200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">706.80</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,240,000 (1)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">(3)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common stock issuable upon conversion of the convertible notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,240,000 (1)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">(2)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common stock issuable upon exercise of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,240,000 (1)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7,440,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">848.16</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,800 (1)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">(4)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Common stock issuable upon exercise of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,800 (1)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">328,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">37.48</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional shares of Common Stock issuable with respect to warrants and notes(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">506,960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,041,760</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">346.76</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 21.75pt">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">17,010,560</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,949.31</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Pursuant to Rule 416 under the Securities Act, there are also being registered hereby such additional indeterminate number
of securities as may become issuable pursuant to terms which provide for a change in the amount of securities being offered or
issued to prevent dilution resulting from stock splits, stock dividends, or similar transactions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>No additional consideration will be received by us for the Common Stock issuable upon conversion of the Notes. Pursuant to
Rule 457(i) under the Securities Act, no additional registration fee is required in connection with the registration of the common
stock issuable upon conversion of the Notes.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required with respect to the warrants as
they are being registered in the same registration statement as the Common Stock to be offered pursuant thereto.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Estimated number of additional shares which may be issued as a result of conversion or exercise price anti-dilution adjustments,
interest payments on the notes, stock dividends, stock splits, recapitalization and similar events applicable to the notes and
warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION&nbsp;8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION&nbsp;8(A), MAY DETERMINE.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: red">The information in this prospectus is not complete
and may be changed.&nbsp;&nbsp;We may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective.&nbsp;&nbsp;This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SUBJECT TO COMPLETION, DATED&nbsp;SEPTEMBER
14, 2012</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>PRELIMINARY PROSPECTUS</U></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Up to $6,200,000 aggregate principal
amount of 6% convertible notes due 2017 and warrants to purchase up to 1,294,800 shares of common stock and shares of common stock
issuable upon conversion of the notes and the warrants</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BOOMERANG SYSTEMS, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We issued $6,200,000 aggregate principal
amount of our 6% convertible notes due 2017, referred to as the notes, and warrants to purchase 1,240,000 shares of our common
stock in a private placement. In connection with the private placement, we also issued to the placement agent, warrants to purchase
54,800 shares of our common stock. The warrants issued to the investors and the placement agent are referred to collectively as
the warrants. The selling securityholders identified in this prospectus may use this prospectus to resell the notes, warrants and
shares of common stock issuable upon conversion of the notes or exercise of the warrants. We will not receive any of the proceeds
from the securities sold by these selling securityholders. We will, however, receive the exercise price from the exercise of warrants
to the extent the cashless exercise provision is not utilized. We have also registered for resale by the selling security holders
up to an additional 506,960 shares of common stock in the event of anti-dilution adjustments to the conversion or exercise price
of the notes or warrants, interest payments on the notes in shares, stock dividends, stock splits, recapitalizations or similar
events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The notes are initially convertible into
common stock at $5.00 per share, subject to adjustment. The notes are due on June 14, 2017. Interest accrues on the Notes at 6%
per annum. Interest is payable quarterly, commencing on June 30, 2012, with respect to the notes issued in June 2012, and September
30, 2012, with respect to the notes issued in July 2012, at the Company&rsquo;s option, interest may be payable in: (i) cash or
(ii) shares of the common stock, as described in this prospectus. The outstanding principal amount of the notes and accrued and
unpaid interest thereon will automatically convert into a number of shares of common stock determined by dividing the outstanding
principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in effect on the mandatory conversion
date, as described in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The warrants are exercisable at $5.00 per
share, subject to adjustment. Cashless exercise is permitted if the average trading volume of our common stock during at least
five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise is at least 10,000 shares,
and will be based upon the average of the last sale price of the common stock during the five (5) consecutive trading days prior
to the notice of exercise. In certain instances, a holder is not permitted to exercise the warrant if such exercise would result
in such holder&rsquo;s total ownership of our common stock exceeds 4.9%. The warrants expire on June 14, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There is presently only a limited market
for our common stock and no public market for our notes and warrants. We do not intend to apply for listing of the notes or warrants
on any national securities exchange or for the quotation of the notes or warrants through any automated quotation system. The public
offering price for the warrants will be $2.26 per warrant. In calculating this price, we used the Black-Scholes option pricing
model, which utilizes inputs such as the closing price of our common stock, exercise price of the warrants, assumed dividend yield,
assumed risk-free interest rate, expected volatility and expected term. The public offering price for the notes will be the principal
amount of the note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is quoted on the OTCQB
tier of the OTC Markets under the symbol &ldquo;BMER.&rdquo; The last closing bid price of our common stock on September 12, 2012
was $3.80 per share. The initial public offering price for the common stock will be $6.00 per share until the shares of common
stock are quoted on a national securities exchange or the OTC Bulletin Board at which time the shares of common stock will be
sold at prevailing market prices or at privately negotiated prices. There can be no assurance our common stock will be quoted
on a national securities exchange or the OTC Bulletin Board.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These are speculative securities. Investing
in these securities involves significant risks. You should purchase these securities only if you can afford a complete loss of
your investment. See &ldquo;Risk Factors&rdquo; beginning on page 5.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus.&nbsp;&nbsp;Any representation to the contrary is a criminal offense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<HR ALIGN="CENTER" NOSHADE SIZE="1" STYLE="color: Black; width: 50%; margin-top: 0; margin-bottom: 0">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The date of this prospectus&nbsp;is&nbsp;<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>,&nbsp;2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">TABLE OF CONTENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0.5in"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%; text-indent: 0in; font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 10%; text-indent: 0in; font-weight: bold; text-align: right">PAGE</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>ABOUT THIS PROSPECTUS</TD>
    <TD STYLE="text-align: right">ii</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>PROSPECTUS SUMMARY</TD>
    <TD STYLE="text-align: right">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>THE OFFERING</TD>
    <TD STYLE="text-align: right">3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>RISK FACTORS</TD>
    <TD STYLE="text-align: right">4</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>STATEMENT REGARDING FORWARD-LOOKING STATEMENTS</TD>
    <TD STYLE="text-align: right">20</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>USE OF PROCEEDS</TD>
    <TD STYLE="text-align: right">22</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>DIVIDEND POLICY</TD>
    <TD STYLE="text-align: right">22</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>MARKET FOR COMMON EQUITY</TD>
    <TD STYLE="text-align: right">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</TD>
    <TD STYLE="text-align: right">24</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>OUR BUSINESS</TD>
    <TD STYLE="text-align: right">37</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>MANAGEMENT</TD>
    <TD STYLE="text-align: right">50</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</TD>
    <TD STYLE="text-align: right">57</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</TD>
    <TD STYLE="text-align: right">63</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>SELLING SECURITYHOLDERS</TD>
    <TD STYLE="text-align: right">67</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>PLAN OF DISTRIBUTION</TD>
    <TD STYLE="text-align: right">73</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>DESCRIPTION OF SECURITIES</TD>
    <TD STYLE="text-align: right">75</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS</TD>
    <TD STYLE="text-align: right">85</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</TD>
    <TD STYLE="text-align: right">95</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>LEGAL MATTERS</TD>
    <TD STYLE="text-align: right">95</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>EXPERTS</TD>
    <TD STYLE="text-align: right">95</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>WHERE YOU CAN FIND MORE INFORMATION</TD>
    <TD STYLE="text-align: right">95</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</TD>
    <TD STYLE="text-align: right">F-1</TD></TR>
</TABLE>
<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">ABOUT THIS PROSPECTUS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should rely only on the information
contained in this prospectus we have authorized for use with respect to this offering. We have not authorized anyone to provide
you with different or additional information.&nbsp;&nbsp;If anyone provides you with different or additional information, you should
not rely on it. You should not assume that the information in this prospectus is accurate or complete as of any date other than
the dates of the applicable documents.&nbsp;&nbsp;Our business, financial condition, liquidity, results of operations and prospects
may have changed since those dates. This prospectus is not an offer to sell or the solicitation of an offer to buy these securities
in any jurisdiction where offers or sales are not permitted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">It is important for you to read and consider
all of the information contained in this prospectus before making your investment decision.&nbsp;&nbsp;See &ldquo;Where You Can
Find More Information&rdquo; in this prospectus for instructions on how you can access additional information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless the context requires otherwise, or
unless otherwise noted, all references to the &ldquo;Company,&rdquo; &ldquo;we,&rdquo; &ldquo;our,&rdquo; or &ldquo;us&rdquo; refer
collectively to Boomerang Systems, Inc. and its consolidated subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 20, 2011, we effected a 1-for-20
reverse stock split. All share numbers included in this prospectus are post reverse stock split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<DIV STYLE="padding: 5pt; border: Black 1pt solid">

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">PROSPECTUS SUMMARY</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summary highlights
selected information contained in this prospectus.&nbsp;&nbsp;Because it is a summary, it does not contain all the information
you should consider before investing in our securities.&nbsp;&nbsp;Before making any investment decision, you should read the entire
prospectus carefully, including the &ldquo;Risk Factors&rdquo; section of this prospectus beginning on page 5, and the financial
statements and notes to the&nbsp;financial statements beginning on page F-1.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The Company</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our company, Boomerang Systems, Inc., is
engaged in the business of marketing, designing, engineering, manufacturing, installing and supporting its own line of fully automated
parking systems and fully automated self storage systems, with corporate and sales offices in Florham Park, New Jersey, and a research,
design, production and testing center in Logan, Utah.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Boomerang entered the business of automation
by developing and marketing automated self-storage systems to provide the space efficiency, security, and convenience of 100% &ldquo;drive-up
accessible&rdquo; vertical self-storage in densely populated urban locations with high real estate values. This system, which we
refer to as Boomerang&rsquo;s Automated Locker Retrieval System, stores steel storage containers in a steel rack system with a
central open atrium and shuttles that move along a rail (i.e., &ldquo;rack &amp; rail&rdquo;) transport containers back and forth
between storage locations and ground floor loading bays.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">While promoting our self storage system,
we received numerous inquiries to provide space-saving automated parking systems. In 2007, we began to develop automated parking
systems to expand our product line and enter that business. While we believe the automated self-storage has significant potential,
we believe the demand for automated parking systems is substantially larger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To serve this market, we have developed
two automated parking product lines, which we refer to as &ldquo;rack &amp; rail&rdquo; systems and &ldquo;RoboticValet&trade;&rdquo;
systems. While our rack &amp; rail systems compete with other rail or track based automated parking systems offered by other automated
parking providers, we believe that our RoboticValet system is unique in the marketplace with distinct advantages over other systems
historically offered by competitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since emerging from a business development
stage company in 2008, we have had negative working capital and an annual net loss. We had a net loss of $19,102,004 in fiscal
2011 and a net loss of $13,378,735 in the third quarter of fiscal 2012. As of the end of fiscal 2011, we had an accumulated deficit
of $52,812,498 and as of the end of the third quarter of fiscal 2012, we had an accumulated deficit of $66,191,233. Losses are
continuing to date and are expected to continue into the future until such time as we are able to generate meaningful sales of
our systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our corporate offices are located at 30
B Vreeland Road, Florham Park, New Jersey 07932, where our telephone number is (973) 538-1194.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Private Placement of Notes and Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June and July 2012, we issued to subscribers
6% convertible promissory notes due 2017 in the aggregate principal amount of $6.2 million and warrants to purchase 1,240,000 shares
of common stock in a private placement, which expire on June 14, 2017. In connection with the private placement, we received cash
proceeds of approximately $5.5 million. For each $100,000 invested, a subscriber was issued a $100,000 principal amount note and
warrants to purchase 20,000 shares of our common stock. See &ldquo;Description of Securities&rdquo; for a description of the terms
of the Notes and Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the private placement,
we paid Gilford Securities Incorporated, an aggregate cash fee of approximately $299,000 for its services as placement agent. We
issued warrants to Gilford Securities Incorporated warrants to purchase an aggregate of 54,800 shares of common stock. These warrants
expire five years from the respective date of issuance and contain substantially the same terms as those issued to subscribers.
In connection with the private placement, we also paid a registered broker-dealer an aggregate amount of $54,000 for its services
in connection with the private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a registration rights
agreement with the subscribers and the placement agent. Pursuant to the registration rights agreement, we agreed to file a registration
statement within 90 days after the closing date of the offering to register for resale or the notes, the warrants, the shares of
common stock issuable upon conversion of the notes and exercise of the warrants (collectively, referred to as the Registrable Securities).
In the event that the SEC limits the number of Registrable Securities that may be included in the registration statement, we shall
include only those Registrable Securities permitted by the Securities and Exchange Commission, or SEC, and shall file additional
registration statements at the earliest practicable date as we are permitted to do so in accordance with SEC guidelines. We shall
use our best efforts to cause (i) the Registration Statement to be effective within 150 days of the offering, and (ii) any additional
registration statements to be declared effective within 90 days of the required filing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Securities
an amount equal to 1% of the original principal amount of the investor&rsquo;s note, multiplied by a fraction with the numerator
equal to the number of Registrable Securities that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the notes and exercise of the warrants purchased pursuant
to the subscription agreement and owned by such holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">THE OFFERING</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 98%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 49%; font-weight: bold">Convertible Notes due 2017 Offered for Resale by the Selling Securityholders</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 49%">$6.2 million aggregate principal amount of the 6% convertible notes due 2017 which are currently convertible into 1,240,000 shares of our common stock.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Warrants Offered for Resale by the Selling Securityholders</TD>
    <TD>&nbsp;</TD>
    <TD>Warrants to purchase 1,294,800 shares of our common stock.&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Shares of Common Stock Offered for Resale by the Selling Securityholders(1)</TD>
    <TD>&nbsp;</TD>
    <TD>2,480,000, assuming conversion of the entire principal amount of the notes and exercise of all the warrants.&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Additional number of Shares of Common Stock that may be Offered for Resale by the Selling Securitiyholders in the Event of Anti-dilution Adjustments to the Notes and Warrants, Interest Payments on the notes, Stock Dividends, Stock Splits, Recapitalization and similar events</TD>
    <TD>&nbsp;</TD>
    <TD>506,960, assuming conversion of the entire principal amount of the notes and exercise of all of the warrants and there has been an anti-dilution adjustment to the conversion and exercise price or interest payments in stock on the notes, a stock dividend, stock splits, recapitalization or similar event.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Summary of the Notes</TD>
    <TD>&nbsp;</TD>
    <TD>The notes are initially convertible into common stock at $5.00 per share, subject to adjustment.&nbsp; The notes are due on June 14, 2017.&nbsp; Interest accrues on the Notes at 6% per annum.&nbsp; Interest is payable quarterly, commencing on June 30, 2012 with respect to the notes issued in June 2012 and September 30, 2012 with respect to the notes issued in July 2012, at the Company&rsquo;s option, interest may be payable in: (i) cash or (ii) shares of the common stock, as described in this prospectus.&nbsp; The outstanding principal amount of the notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined by dividing the outstanding principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in effect on the mandatory conversion date, as described in this prospectus.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">Summary of the Warrants</TD>
    <TD>&nbsp;</TD>
    <TD>The warrants are exercisable at $5.00 per share, subject to adjustment.&nbsp; Cashless exercise is permitted if the average trading volume of our common stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise.&nbsp; In certain instances, a holder is not be permitted to exercise the warrant if such exercise would result in such holder&rsquo;s total ownership of our common stock exceeds 4.9%.&nbsp; The warrants expire on June 14, 2017.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 98%; border-collapse: collapse">
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    <TD STYLE="width: 49%; font-weight: bold">Use of Proceeds</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 49%">We will not receive any proceeds from the sale of the securities offered by the selling securityholders, except that we may receive the exercise price from the exercise of the warrants to purchase common stock for the underlying common stock to the extent the cashless exercise provision contained in the warrant is not utilized.&nbsp; We intend to use any proceeds we may receive from the cash exercise of the warrants for working capital and other general corporate purposes.&nbsp; See &ldquo;Use of Proceeds.&rdquo;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<HR ALIGN="LEFT" NOSHADE SIZE="1" STYLE="color: Black; width: 25%; margin-top: 0; margin-bottom: 0">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 98%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>The number of shares of our common stock outstanding was 7,399,086<B> </B>shares on September 13, 2012. Unless otherwise indicated,
the number of outstanding shares of common stock presented in this prospectus excludes:&nbsp;&nbsp;1,240,000 shares of our common
stock issuable upon the conversion of the notes and 1,294,800 shares of our common stock issuable upon the exercise of the warrants;
506,960 shares of our common stock that may be offered under this prospectus in the event of anti-dilution adjustments to the conversion
or exercise price of the notes or warrants, interest payments on the notes in shares, stock dividends, stock splits, recapitalizations
or similar events; and 10,807,157<B> </B>shares of our common stock issuable upon conversion, exchange or exercise in respect of
outstanding options, other notes, other warrants and other securities.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Risk Factors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Investing in our securities involves a high
degree of risk.&nbsp;&nbsp;You should carefully consider the information under &ldquo;Risk Factors&rdquo; beginning on page&nbsp;5&nbsp;before
investing in our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

</DIV>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">RISK FACTORS</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to the other information
included in this prospectus and any prospectus supplement, the following factors should be carefully considered in evaluating an
investment in our securities, our business, financial condition, results of operations, and future prospects.&nbsp;&nbsp;Any of
the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, results
of operations, or future prospects.&nbsp;&nbsp;If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, our actual results may be materially adversely affected. There may be additional risks that
we do not presently know or that we currently believe are immaterial which could also materially adversely affect our business,
financial condition, results of operations, or future prospects. In any such case, the value of our securities could decline substantially
and you could lose all or a part of your investment.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><U>Risks Related to Our Business</U></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our increased indebtedness may
harm our financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 30, 2011, our total consolidated
long-term debt was approximately $6.2 million and as of June 30, 2012, our total long-term debt was approximately $17.7 million.
Since then, we have incurred approximately an additional $1.2 million of long-term debt from related party loans and a private
offering. Our level of indebtedness could have important consequences to us and you, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>it could adversely affect our ability to satisfy our obligations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an increased portion of our cash flows from operations may have to be dedicated to interest and principal payments and may
not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>it may impair our ability to obtain additional financing in the future;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>it may limit our flexibility in planning for, or reacting to, changes in our business and industry; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>it may make us more vulnerable to downturns in our business, our industry or the economy in general.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our operations may not generate sufficient
cash to enable us to service our debt. If we were to fail to make any required payment under the notes and agreements governing
our indebtedness or fail to comply with the covenants contained in the notes and agreements, we would be in default. Our debt holders
would have the ability to require that we immediately pay all outstanding indebtedness. If the debt holders were to require immediate
payment, we might not have sufficient assets to satisfy our obligations under the notes or our other indebtedness. In such event,
we could be forced to seek protection under bankruptcy laws, which could have a material adverse effect on our existing contracts
and our ability to procure new contracts as well as our ability to recruit and/or retain employees. Accordingly, a default could
have a significant adverse effect on the market value and marketability of our common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have limited operating history
which makes it difficult to predict future growth and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have a relatively short operating history
which makes it impossible to reliably predict future growth and operating results. We are subject to all the risks and uncertainties
which are characteristic of a relatively new business enterprise, including the substantial problems, expenses and other difficulties
typically encountered in the course of its business, in addition to normal business risks. We face a high risk of business failure
because we have commenced extremely limited business operations and have earned little revenues and have had only material losses
since our inception. We expect to continue to incur losses well into the future. Our activities to date have been limited to organizational
efforts, including fundraising, research and development, product design, marketing and manufacturing a small number of automated
storage and parking systems and limited sales of our systems. There is no relevant history upon which to base any assumption as
to the likelihood that our business will be successful, and there can be no assurance that we will generate significant operating
revenues in the future or that we will ever be able to achieve profitable operations in the future. We face all of the risks commonly
encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional
capital and personnel, and intense competition.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have a limited amount of cash
to grow our operations. If we cannot obtain additional sources of cash, our growth prospects and future profitability may be materially
adversely affected and we may not be able to implement our business plan or fulfill existing contracts. Such additional financing
may not be available on satisfactory terms or it may not be available when needed, or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of June 30, 2012, we had cash and cash
equivalents of $3,261,098. At the present time, we believe our working capital together with cash from ongoing projects are sufficient
to support our marketing activities, administrative requirements and existing projects. However, to implement our full business
plan, we may require additional funds during the fiscal year ending September 2013, and would anticipate seeking to raise these
funds through public or private debt or equity offerings, including offerings to our existing security holders. In addition, we
may seek to restructure our existing liabilities and debt. There can be no assurance that the capital we require to meet our operating
needs will be available to us on favorable terms, or at all. If we are unsuccessful in raising sufficient capital, we may be required
to curtail our operations. If we issue securities to raise capital, our existing stockholders may experience dilution, or the new
securities may have rights senior to those of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Moreover, if we do not have adequate capital
to complete a contract subsequent to its commencement, particularly if we have received installment payments, we may be subject
to claims for failure to perform by the customer. Our financial condition may also deter potential customers from contracting with
us.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have a history of losses and
cash outflow from operations which may continue if we do not increase our sales or reduce our costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since emerging from the status of a business
development company in 2008, we have generated few sales, and have generated an operating loss in each financial period. Our accumulated
deficit as of September 30, 2011 was $52,812,498 and as of June 30, 2012 was $66,191,233. Losses are continuing to date and are
expected to continue into the future until such time as we are able to generate meaningful sales of our systems. In order to improve
our profitability, we will need to continue to generate new sales while controlling our costs. As we plan to continue to invest
to grow our business, we may not be able to successfully generate sufficient sales to achieve profitability. Our ability to achieve
profitability also depends on our ability to expand our customer base and scale up our production capacity beyond our existing
capacity, as well as our ability to provide products to meet the demands of our customers. If we fail to reduce the cash consumption
from operations and to generate cash from other sources on a timely basis, or if the cash requirements of our business change as
the result of changes in the cost of materials, a decline in the real estate market or other causes, we could no longer have the
cash resources required to run our business. There is no assurance that we will achieve profitable operations at any point in time
or at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The loss of one or more of our
raw materials suppliers or suppliers of components used in our equipment, or increase in prices, could cause production delays,
a reduction of revenues or an increase in costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The principal raw materials we use are steel
and related products. In addition, we use several components such as batteries, control boards and sensors in the manufacture of
our equipment. We have no long-term supply agreements with any of our major suppliers. However, we have generally been able to
obtain sufficient supplies of raw materials and components for our operations. Although we believe that such raw materials and
components are readily available from alternate sources, an interruption in the supply of steel and related products or a substantial
increase in the price of any of these raw materials and components could result in a delay in our ability to build and install
systems and reductions in our profit margins.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have neither commissioned nor
performed any detailed market studies. Our assumptions regarding the potential market for our products may be incorrect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. Although we believe there is a substantial market for our automated parking and storage
systems, there can be no assurance that the market for these systems will be significant.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have only recently begun to
commercialize our automated parking and storage systems, which have not been fully field tested and remain unproven.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of the contracts we currently have are
subject to various uncertainties with respect to the underlying projects. To date, we have not completed the commercial installation
of any automated parking systems. We expect that, as our systems are installed and used, they will be tested in ways that we cannot
fully duplicate outside of the context of an actual, commercial operation of our systems, which has not yet occurred. As a result,
once our parking systems are used in commercial operations, we expect to discover various aspects of our systems that require improvement.
Based on the limited operation of our test systems to date, it is possible there may be a need for the redesign of certain aspects
of our systems. Any redesign requirement could delay existing projects and new sales, could result in increased cost or lowered
performance for our systems and could negatively impact the market&rsquo;s acceptance of our systems.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Because our parking systems are
different from those currently available, we must actively seek market acceptance of our systems, which we expect may occur gradually,
if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our systems are new and our current system
RoboticValet&trade; automated parking system is substantially different from existing automated parking systems as well as traditional
parking garages. A number of enterprises, municipalities and other organizations that could be potential customers for our systems
may be reluctant to commit themselves to our systems until one or more systems have been tested in commercial operations over a
significant period of time. As a result, we may experience difficulty in achieving market acceptance for our systems. A number
of automated parking systems exist in the United States and elsewhere. Most of these systems are materially different in concept
from our robotic system. We believe that our RoboticValet&trade; system offers a number of advantages over existing automated systems
and traditional parking structures. However, we expect challenges in demonstrating the advantages of our systems to potential customers
and possibly others in the absence of significant historical data as to their performance. A customer that purchases our systems
will likely design the project around it and therefore would encounter significant difficulties if the system did not perform as
claimed. We expect that widespread market acceptance of our systems may occur only gradually over time, if at all. A significant
ramp-up in sales may be delayed until our systems achieve a meaningful history of commercial operations, which would delay our
anticipated recognition of revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We may incur significant costs
in connection with the start-up of new contracts before receiving related revenues, which could result in cash shortfalls and fluctuations
in quarterly results from period to period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may incur expenses before we receive
any contract payments. These expenses include design and manufacturing expenses. For example, contracts may not fund start-up costs
related to the project and may require that the purchaser obtain necessary regulatory and governmental approvals for development
of an automated parking system prior to our receiving a deposit or commencing work on the project. Accordingly, even if we are
successful in negotiating deposit payments, we may be required to invest significant sums of money before receiving further related
contract payments and the timing of installment payments may not match the timing of our cash outlays. Additionally, any resulting
cash shortfall could be exacerbated if we fail to promptly receive payment upon completion of a portion of a project or to otherwise
collect fees in a timely manner. A cash shortfall could result in significant consequences. For example, it:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>could increase our vulnerability to general adverse economic and industry conditions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>would require us to dedicate a substantial portion of our cash flow from operations to service payments on our indebtedness;
reducing the availability of our cash flow to fund future capital expenditures, working capital, execution of our growth strategy,
research and development costs and other general corporate requirements;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>could limit our availability to undertake additional projects;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>could limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a
competitive disadvantage compared with competitors; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>could limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">As a result, there are no assurances that
additional funds, if needed, to help fund start-up costs related to new contracts would be available or, if available, on terms
advantageous to us and therefore we may have to dramatically curtail or cease operations.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have continued to experience
delays and cost overruns on our first APS project and may experience delays and cost overruns on future projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have experienced a number of delays
and cost overruns on the project on Collins Avenue in Miami Beach for a number of reasons including the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>As a result of this being the first APS project of this size that we have executed, we had a limited ability to properly estimate
the time and resources required to fully design, engineer, manufacture, ship, install, and commission prior to executing the project.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>In addition, while our system constitutes a key component of our customer&rsquo;s real estate development project, the project
itself consists of many other components not provided by us. Some of these components, such as the foundation upon which the system
is to be installed, must be in place before we can install our system. In addition, other components provided by the customer such
as the building shell erected around our parking system and the fire suppression system installed within our parking system are
not supplied by us but must be implemented in conjunction with the installation and commissioning of our system. Delays in the
procurement of those components, and lack of coordination between other contractors implementing those components, which were not
our contractual responsibility, had a negative impact on the project schedule and resulted in cost overruns. While we typically
contract for the right to bill our customer additional charges for change orders, delays and cost overruns caused by such circumstances,
we may choose not to charge our customer in a good faith effort to maintain a positive relationship with our customer.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>At this time we have yet to complete this project which is behind schedule and over budget. In order to accelerate completion
of this project, we have allocated additional resources and staff, and we cannot be certain about how much additional time and
resources it will take to complete. Because we have limited resources, additional time and effort spent on this project may have
an adverse effect on our ability to support other projects and various critical aspects of our business plan.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>In discussions with the customer, we have had disagreements as to what constitutes the completion of the system. In the event
that we cannot agree upon whether the project has been satisfactorily completed, it could adversely affect our ability to collect
additional amounts for this project and our reputation in the marketplace.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>We may experience substantial delays in
the start dates, manufacturing and installation of our systems for our current and future contracts due to factors out of our control.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we are not experiencing delays
in obtaining approvals necessary to begin fulfilling contracts, certain of our customers are experiencing delays in their efforts
to obtain the necessary financing and/or government permitting required for their entire project to move forward, of which our
systems may only be a small component. Some examples of tasks a real estate developer may need to complete before commencing the
construction of a building include:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>conducting environment impact studies;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>conducting traffic impact studies;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>securing planning approvals;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>finishing design of building;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>finishing engineering of building;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>securing construction permits;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>selecting general contractor; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>securing construction loan.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We may not receive substantial
payments under our contracts until the installation of all or a portion our systems, which in some cases could take over a year
or longer, or may not occur at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect to receive a majority of our contract
payments during the design, fabrication and assembly phases of our projects. However, a substantial portion of the contract payments
will be collected during the installation and system acceptance phases. While we have opportunities to install our systems in existing
parking structures, we anticipate that the bulk of our opportunity will be in connection with new parking structures. For our systems
to work most effectively, the parking structure itself must be designed with the use of our system in mind. Accordingly, we expect
that the majority of our sales contracts will be entered into at the planning stage for the related construction project. We expect
that the sales cycle, itself, will often be long because of the need to coordinate the design and permitting process for the project
as a whole. Large construction projects requiring parking facilities for numerous vehicles typically take several years to plan,
finance, permit and complete. Our existing contracts provide that we will be paid upon completion of various stages of completion
of the project. We anticipate that, in most cases, our systems will be installed toward the end of the project construction process,
which could occur several years after the sale is originally made. Even where our contracts provide for deposit payments before
we begin work and for payments on a percentage of completion basis for the work we do, there can be no assurance that our costs
will not outpace the payments received. In addition, if a project fails or is terminated prior to installation of our system, we
will not receive the remaining installment payments, which could result in our incurring a significant loss on the termination
of the project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B><I>Because our systems are complex, it
is difficult to know prior to commencing project specific design and engineering work if our proposed system is adequate to meet
the customer&rsquo;s requirements. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because our systems are complex, it is difficult
to know prior to commencing project specific design and engineering work if our proposed system is adequate to meet the customer&rsquo;s
requirements. Since we typically do not perform such work until we have been contracted by our customer, it is possible that we
may have to renegotiate the price and terms of our contracts, if in the course of designing and engineering the system we determine
that we had previously underestimated the scope of the customer&rsquo;s requirements. In such a situation it is possible that we
may not be able to negotiate an alternate solution and price with our customer which might in turn result in a termination of our
contract</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B><I>Some of our contracts contain fixed-price
provisions that could result in losses or decreased profits if we fail to accurately estimate our costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we have incurred a loss on all
of our contracts. Some of our contracts contain pricing provisions that require the payment of a set fee by the customer for our
services regardless of the costs we incur in performing these services. In such situations, we are exposed to the risk that we
will incur significant unforeseen costs in performing the contract. Therefore, the financial success of a fixed-price contract
is dependent upon the accuracy of our cost estimates made during contract negotiations. Prior to bidding on a fixed-price contract,
we attempt to factor in variables including equipment costs, labor, materials and related expenses over the term of the contract.
However, it is difficult to predict future costs, especially for contract terms that range from 3 to 5 years. Any shortfalls resulting
from the risks associated with fixed-price contracts will reduce our working capital and profitability. Our inability to accurately
estimate the cost of providing services under these contracts could have an adverse effect on our profitability and cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The economic decline has caused,
and may continue to cause, a decline in the type of real estate development projects that we intend to target.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because our sales will depend on the development
of projects in which our systems will be incorporated, our sales are likely to be heavily dependent on the construction climate
in the markets that we address. Since 2007, new real estate projects in the United States have experienced substantial declines
and it is not clear whether, when or to what extent a recovery will occur. A continued slump in new project construction would
make it more difficult for us to achieve our growth objectives.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our ability to perform under our
contracts and thereby recognize revenues is dependent on the ability of the project owner to commence and complete construction
of the project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Major residential and commercial construction
projects are subject to various uncertainties at several stages. Design, permitting or financing issues can result in substantial
delays and, ultimately, can render a project untenable. Furthermore, even when the underlying project is fully funded and permitted,
economic and other real estate market conditions, and possible interruptions in the project moving forward, continue to create
uncertainty as to whether and when the project will be completed. Changes in demographics and other macroeconomic changes can cause
major construction projects to be delayed or abandoned because they are no longer viable or because they cannot be financed. For
example, the recent recession has resulted in a substantial decrease in construction on a global basis. We intend that our contracts
with our customers will provide for a percentage of the contract price to be paid to us if a project is substantially delayed or
abandoned. However, we may be unable to negotiate such arrangements and any such compensation is likely to be substantially less
than the revenues and profit we would have earned if the project had been completed. Our long-term planning will be based on various
assumptions about project completion rates that may not prove to be accurate. A significant delay in construction schedules or
a significant number of project abandonments would have a material adverse impact on our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have limited experience estimating
our manufacturing and other costs and may underestimate these costs rendering our contracts less profitable or creating losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Through the date of these financial statements,
we have manufactured and assembled one automated parking and one automated storage system intended for commercial use, and have
a third system currently being assembled. Accordingly, we have limited experience in acquiring and manufacturing the parts and
components for the systems, assembling the systems, and in estimating the labor and overhead costs incurred with manufacturing
the parts and components for the systems, assembling the systems, and in estimating the labor and overhead costs incurred with
the manufacturing, assembling and installing the automated parking and storage systems. This limited experience may result in us
underestimating these costs which could lead to our expenses exceeding the revenues we receive from the contracts we have entered
into and that we may enter into in the future. Moreover, we anticipate that due to our limited experience in executing projects
of this size, executing multiple projects at the same time may affect our ability to deliver systems on a consistent and timely
basis. Losses on our contracts will deplete our cash resources and adversely affect our revenues. At June 30, 2012, we estimated
that we would incur a loss on a rail based project. The total loss was estimated to be approximately $3,275,000 through completion
of the project, which is expected to be on or about November 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect to face intense competition
in selling our systems and we may not be able to compete with our more established competitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">While we believe that our systems offer
a number of advantages over existing garage structures, and other automated parking systems, we expect to face intense competition
not only from other systems, but from rack and rail systems and traditional parking garages. Many of the companies with which we
may compete have established products, existing relationships and financial capacity that may offer them a competitive advantage.
If we are correct in our assumption that the advantages of our systems are significant to customers, we can anticipate that other
companies, some with stronger engineering and financial capabilities than we have, will seek to design comparable systems that
offer similar or greater advantages. We expect that we will have to continually innovate to reduce cost and increase effectiveness
in order to remain competitive and there is no assurance that our systems will become competitive or remain so over time.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our lack of sufficient patent
protection may undermine our competitive position and subject us to intellectual property disputes with third parties, both of
which may have a material adverse effect on our business, results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have filed patent applications with respect
to certain aspects of our automated self-storage and automated parking systems but to date we have not been granted any patent
protection for our automated parking or self-storage systems and there can be no assurance that, if one or more of our pending
applications were allowed, any significant patent protection would be granted.<B> </B>Accordingly, we may have limited protection
to prevent others from entering into competition with us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, others may obtain knowledge
of our know-how and technologies through independent development. Our failure to protect our production process, related know-how
and technologies and/or our intellectual property and proprietary rights may undermine our competitive position. Third parties
may infringe or misappropriate our proprietary technologies or other intellectual property and proprietary rights. Policing unauthorized
use of proprietary technology can be difficult and expensive. Litigation, which can be costly and divert management attention and
other resources away from our business, may be necessary to enforce our intellectual property rights, protect our trade secrets
or determine the validity and scope of our proprietary rights. We cannot assure you that the outcome of such potential litigation
will be in our favor. An adverse determination in any such litigation will impair our intellectual property and proprietary rights
and may harm our business, prospects and reputation.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We may be exposed to infringement
or misappropriation claims by third parties, which, if determined adversely to us, could cause us to pay significant damage awards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our success also depends largely on our
ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. The
validity and scope of claims relating to patents involve complex scientific, legal and factual questions and analysis and, therefore,
may be highly uncertain. We may be subject to litigation involving claims of patent infringement or violation of intellectual property
rights of third parties. The defense and prosecution of intellectual property suits and related legal and administrative proceedings
can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel.
An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability
to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our anticipated products
or subject us to injunctions prohibiting the manufacture and sale of our anticipated products or the use of our technologies. Protracted
litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our anticipated
products until resolution of such litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Failures of our systems could
expose us to liabilities that may not be fully covered by insurance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we have designed a number of safeguards
into our systems, they may fail, causing delays, injury or damage to persons, vehicles or other property that may not be covered
by insurance. Our insurance does not cover any contractual liability that we may have as a result of a delay in delivery of systems
to our customers. Any such events, whether covered by insurance or not, could have a material adverse effect on our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our success is dependent upon
our executive officers and other key personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We rely for the conduct of our business
on a small group of people whose expertise and knowledge of our business are critical to the prospects for its success. Our Chief
Executive Officer, President, and the Chief Executive Officer of our wholly owned subsidiary have accepted substantial equity interests
and less cash for their services and it is unlikely that we could attract employees of comparable ability for the cash compensation
that we are currently paying to these individuals. The loss of any of our key management team would cause significant disruption
in our operations and would require us to seek suitable replacements. There is no assurance that we could attract qualified employees
quickly or without incurring significant increased cost.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Because some of our officers have
only agreed to provide their services on a part-time basis, they may not be able or willing to devote a sufficient amount of time
to our business operations, which may cause our business to fail.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although our Chief Executive Officer has
agreed to devote the vast majority of his productive time, ability and attention to our business, he also is permitted to provide
consulting services to third parties on a limited basis, and to serve on other boards of directors. In addition, Stan Checketts,
Chief Executive Officer of our wholly owned operating subsidiary, Boomerang Sub, Inc., and a member of the Company&rsquo;s Board
of Directors, has commenced developing, manufacturing, and selling amusement rides through Stan Checketts Properties. As a result,
he devotes less than the majority of his time to us. Accordingly, these officers may not be able to devote sufficient time to the
management of our business, as and when needed. It is possible that the demands of these officers&rsquo; other business commitments
will keep these officers from devoting sufficient time to the management of our business. Competing demands on these officers&rsquo;
time may lead to a divergence between their interests and the interests of other shareholders.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our foreign operations, could
subject us to increased regulations and risks. Failure to comply with these laws may affect our ability to conduct business in
certain countries and may affect our financial performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are currently actively seeking customers
in the United Arab Emirates and the surrounding Gulf region and may seek customers in India and other countries. Our foreign operations
might or would subject us to a number of risks, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>currency fluctuations, which could affect our revenues for transactions denominated in non-U.S. currency or make our services
relatively more expensive if denominated in United States currency;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>difficulties in staffing and managing multi-national operations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>political and economic instability;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>limitations on our ability to enforce legal rights and remedies;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>restrictions on the repatriation of funds;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>changes in regulatory structures or trade policies; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>tariff and tax regulations.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to a variety of laws regarding
our international operations, including the Foreign Corrupt Practices Act and regulations issued by U.S. Customs and Border Protection,
the Bureau of Industry and Security, and the regulations of various foreign governmental agencies. We cannot predict the nature,
scope or effect of future regulatory requirements to which our international sales and manufacturing operations might be subject
or the manner in which existing laws might be administered or interpreted. Future regulations could limit the countries in which
some of our products may be manufactured or sold, or could restrict our access to, and increase the cost of obtaining, products
from foreign sources. In addition, actual or alleged violations of these laws could result in enforcement actions and financial
penalties that could result in substantial costs.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our systems and the projects in
which they are installed are subject to complex and diverse regulation that may increase the cost of our systems or limit their
efficiency.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our systems and the real estate development
projects in which they are installed are subject to a variety of regulations, including zoning and building codes, permitting,
and fire and other safety regulations. Most of these regulations are local and vary considerably from location to location. We
and our customers will be required to design systems and garages that conform to all applicable regulations, which may make it
more difficult to standardize our offerings or to maximize the efficiency of our systems. The enforcement of local regulations
often involves the exercise of considerable judgment and there is likely to be a certain level of uncertainty as to what the regulations
will be held to require in each project. Local regulations may cause delays or cost increases that could have an adverse impact
on our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Environmental regulation and liability
may increase our costs and adversely affect us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our manufacturing operations are subject
to federal and state environmental laws and regulations concerning, among other things, water discharges, air emissions, hazardous
material and waste management. Environmental laws and regulations continue to evolve and we may become subject to increasingly
stringent environmental standards in the future, particularly under air quality and water quality laws and standards related to
climate change issues, such as reporting of greenhouse gas emissions. We are required to comply with environmental laws and the
terms and conditions of environmental permits. Failure to comply with these regulations, laws or permits could result in fines
and penalties. We also may be required to make significant expenditures relating to environmental matters on an ongoing basis.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Based upon our marketing experience
to date, we expect to undergo rapid growth of our operations as our sales, manufacturing and installation activity increase; we
may be unable to manage this growth, to retain qualified employees and to implement infrastructure changes necessary to support
this growth which would negatively adversely affect us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are currently managed and run by a small
staff of employees who are engaged primarily in system design, manufacture and sales activity and general and administrative functions.
We expect that, if sales increase as we anticipate, and particularly as sales cycles advance, we will be subjected to rapid growth
and a substantial increase in the activities that we are called upon to perform and the duties we must fulfill. We may fail properly
to anticipate the need for additional employees or be unable to attract and retain qualified employees as required to sustain our
expected growth. We will also be required to put in place in a timely manner effective accounting systems, reporting structures
and other infrastructure required to sustain our growing and developing operations. The failure to anticipate and effectively deal
with these requirements could cause us to miss opportunities that would otherwise be available to us and could cause our performance
to suffer across a broad range of activities. Any such occurrences would have a material adverse effect on our business and prospects.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our management has limited experience
managing a public company and our current resources may not be sufficient to fulfill our public company obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a public company, we are subject to various
requirements of the Securities and Exchange Commission, including record-keeping, financial reporting, and corporate governance
rules. Our management team has limited experience in managing a public company and, historically, has not had the resources typically
found in a public company. Our internal infrastructure may not be adequate to support our reporting and other compliance obligations
and we may be unable to hire, train or retain necessary staff and may be reliant on hiring outside consultants or professionals
to overcome our lack of experience or trained and experienced employees. Our business could be adversely affected if our internal
infrastructure is inadequate, we are unable to engage outside consultants, or are otherwise unable to fulfill our public company
obligations.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Our management and a limited number
of stockholders, many of whom are related parties, collectively hold a controlling interest in us, they have significant influence
over our management and their interests may not be aligned with our interests or the interests of our other stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our company&rsquo;s management and a limited
number of stockholders, many of whom are related parties, retain majority control over us and our business plans and investors
may be unable to meaningfully influence the course of action of our company. The existing management and a limited number of stockholders,
many of whom are related parties, are able to control substantially all matters requiring stockholder approval, including nomination
and election of directors and approval or rejection of significant corporate transactions. There is also a risk that our existing
management and a limited number of stockholders may have interests which are different from investors and that they will pursue
an agenda which is beneficial to themselves at the expense of other stockholders.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">There are limitations on the liabilities
of our directors and executive officers. Under certain circumstances, we are obligated to indemnify our directors and executive
officers against liability and expenses incurred by them in their service to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to our amended and restated certificate
of incorporation and under Delaware law, our directors are not liable to us or our stockholders for monetary damages for breach
of fiduciary duty, except for liability for breach of a director&rsquo;s duty of loyalty, acts or omissions by a director not in
good faith or which involve intentional misconduct or a knowing violation of law, dividend payments or stock repurchases that are
unlawful under Delaware law or any transaction in which a director has derived an improper personal benefit. In addition, we have
entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things,
require us to indemnify each director and executive officer for certain expenses, including attorneys&rsquo; fees, judgments, fines
and settlement amounts, incurred by any such person in any action or proceeding, including any action by us or in our right, arising
out of the person&rsquo;s services as one of our directors or executive officers. The costs associated with providing indemnification
under these agreements could be harmful to our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><U>Risks Related to Our Securities</U></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The notes are unsecured, and,
therefore, are effectively subordinated to any secured debt and to all liabilities of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The notes are unsecured and unsubordinated,
ranking senior in right of payment to all unsecured and subordinated indebtedness and equally in right of payment to all other
unsecured and unsubordinated indebtedness. Effectively the notes are subordinated in right of payment to all of our existing senior
and secured indebtedness, including any indebtedness under any future credit facilities we or any of our subsidiaries may enter
into. In the event of our bankruptcy, liquidation, or reorganization or upon acceleration of the notes due to an event of default
under the notes and in certain other events, our assets will be available to pay obligations on the notes only after all of our
senior and secured indebtedness has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on
any or all of the outstanding notes.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The notes are effectively subordinated
to the indebtedness of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The notes are solely obligations of Boomerang
Systems, Inc. and, accordingly, are effectively subordinated to all debt and other liabilities of our subsidiaries. We are a holding
company with no significant operations of our own. Because our operations are conducted through our subsidiaries, we depend on
dividends, loans, advances and other payments from our subsidiaries in order to allow us to satisfy our financial obligations,
including payments of principal and interest on the notes. Our subsidiaries are separate and distinct legal entities with no legal
obligation to pay any amounts to us. The ability of our subsidiaries to pay dividends and make other payments to us depends on
their earning capital requirements and general financial conditions and is restricted by, among other things, applicable corporate
and other laws and regulations as well as, in the future, agreements to which our subsidiaries may be a party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may not have the funds necessary to repay
the notes at maturity. At maturity, the entire outstanding principal amount of the notes will become due and payable by us. It
is possible that we may not have sufficient funds to repay or repurchase the notes when required. No sinking fund is provided for
the notes.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We may not have sufficient cash
flow to make payments on the notes and our other indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ability to pay principal and interest
on the notes and our other debt and to fund our planned capital expenditures and other growth initiatives depends on our future
operating performance. Our future operating performance is subject to a number of risks and uncertainties that are often beyond
our control, including general economic conditions and financial, competitive and regulatory factors. For a discussion of some
of these risks and uncertainties, please see &ldquo;&ndash; Risks Related to Our Business.&rdquo;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The conversion price of the notes
or exercise price of the warrants may not be adjusted for all dilutive events that may occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The conversion rate of the notes and exercise
price of the warrants are subject to adjustments for certain events, including, but not limited to, the issuance of stock dividends
on our common stock, the issuance of certain rights or warrants, subdivisions or combinations of our common stock, certain distributions
of capital stock, indebtedness, or assets, cash dividends, and issuer tender or exchange offers. The conversion price or exercise
price may not be adjusted for other events that may adversely affect the value of the notes, warrants or the common stock into
which such notes may be convertible or warrants may be exercisable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Conversion of the notes or exercise
of the warrants will dilute the ownership interest of existing stockholders, including holders who had previously converted their
notes or exercised their warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The conversion of some or all of the notes
or exercise of some or all of the warrants will dilute the ownership interests of existing stockholders. Any sales in the public
market of the common stock issuable upon conversion of the notes or exercise of the warrants could adversely affect prevailing
market prices of our common stock. In addition, the existence of the notes or warrants may encourage short selling by market participants
because the conversion of the notes or exercise of the warrants could depress the price of our common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">There is no assurance of an active
public market for our common stock and the price of our common stock may be volatile.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. In the light of the Company&rsquo;s operating
history, continuing losses and financial condition, quotations published in the &ldquo;pink sheets&rdquo; are not necessarily indicative
of the value of the Company. Such quotations are inter-dealer prices, without retail mark-up, mark-down or commissions and may
not necessarily represent actual transactions. 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 OTC Bulletin Board or in the OTCQB tier of the
OTC Markets. It is possible that no active public market with significant liquidity will ever develop. This could negatively impact
your ability to sell the notes, warrants or common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Fluctuations in the price of our
common stock may impact your ability to resell the notes, warrants or the common stock issuable upon conversion of the notes or
exercise of the warrants when you want or at prices you find attractive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because the notes are convertible into and
the warrants are exercisable for our common stock, volatility or depressed prices for our common stock could have an effect on
the trading price of the notes or warrants. Holders who have received common stock upon conversion of the notes or exercise of
the warrants will also be subject to the risk of volatility and depressed prices of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock price can fluctuate as
a result of a variety of factors, many of which are beyond our control. These factors include, among others:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our performance and prospects;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the depth and liquidity of the market for our common stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>investor perception of us and the industry in which we operate;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in earnings estimates or buy/sell recommendations by analysts;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>general financial and other market conditions; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>general economic conditions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, the stock market in general
has experienced extreme volatility that has often been unrelated to the operating performance of a particular company. These broad
market fluctuations may adversely affect the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Application of guidance related
to the Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company&rsquo;s Own Stock has
negatively impacted our statement of operations for the three and nine months ended June 30, 2012 and could continue to negatively
impact our statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the nine months ended June 30, 2012,
we reported an unrealized loss on derivatives of $2,579,818 in our consolidated statements of operations as a result of the change
in fair value of derivative warrant liability relating to the outstanding warrants issued in our November and December 2011 and
June 2012 offerings. Our net income (loss) will continue to fluctuate as a result of the impact of such warrants and will be adversely
affected in each reporting period in which the fair value of the warrants that remain outstanding increase.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">There is no public market for
the notes or warrants, which could limit their value or your ability to sell them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There is currently no public market for
the notes or warrants. We do not intend to list the notes or warrants on any national or other securities exchange. Accordingly,
no public market for the notes or warrants may develop, and any market that develops may not last. Even if an active trading market
were to develop, the notes and warrants could trade at prices that may be lower than the price at which a holder purchased the
notes or warrants, or holders could experience difficulty or an inability to resell the notes or warrants. Any future trading prices
of the notes and warrants will depend on many factors, including prevailing interest rates, the market for similar securities,
general economic conditions, and our financial condition, performance, and prospects. You may be required to bear the financial
risk of an investment in the notes or warrants for an indefinite period of time.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Holders of notes and warrants
are not entitled to any rights with respect to our common stock, but you are subject to all changes made with respect to our common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Holders of notes and warrants will not be
entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any
dividends or other distributions on our common stock), but will be subject to all changes affecting the common stock. Holders of
notes and warrants will only be entitled to rights in respect of our common stock if and when we deliver shares of common stock
to you upon conversion of your notes or exercise of your warrants and, to a limited extent, under the conversion price or exercise
price adjustments applicable to the notes or warrants, as applicable. For example, in the event that an amendment is proposed to
our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders
of record entitled to vote on the amendment occurs prior to delivery of common stock to you, you will not be entitled to vote on
the amendment, although you will nevertheless be subject to any changes in the powers or rights of our common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We are subject to the penny stock
rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to its customers prior
to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our Common
Stock, which in all likelihood would make it difficult for our stockholders to sell their securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Rule 3a51-1 of the Securities Exchange Act
of 1934 establishes the definition of a &ldquo;penny stock,&rdquo; for purposes relevant to us, as any equity security that has
a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number
of exceptions which are not available to us. This classification would severely and adversely affect any market liquidity for our
Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For any transaction involving a penny stock,
unless exempt, the penny stock rules require that a broker or dealer approve a person&rsquo;s account for transactions in penny
stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person&rsquo;s account for transactions in penny stocks, the
broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable
determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which,
in highlight form, sets forth:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The basis on which the broker or dealer made the suitability determination; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>That the broker or dealer received a signed, written agreement from the investor prior to the transaction.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and commission payable to both the broker-dealer
and the registered representative, current quotations for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in penny stocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because of these regulations, broker-dealers
may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling securityholders or other holders to sell their shares
in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional
sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly
traded. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common
stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our stockholders
will, in all likelihood, find it difficult to sell their common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Future sales of our common stock
in the public market or the issuance of our common stock or securities senior to our common stock could adversely affect the trading
price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Certificate of Incorporation currently
authorizes our Board of Directors to issue up to 400,000,000 shares of common stock and 1,000,000 shares of undesignated preferred
stock. In addition, on June 20, 2011, we effected a one-for-twenty reverse split, referred to as the Reverse Split, of our issued
and outstanding common stock which has the effect of increasing the number of authorized shares available for future issuance.
Any additional issuances of any of our authorized but unissued shares will not require the approval of stockholders and may have
the effect of further diluting the equity interest of stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may issue common stock or equity securities
senior to our common stock in the future for a number of reasons, including to attract and retain key personnel, to finance our
operations and growth strategy, to adjust our ratio of debt to equity, to satisfy outstanding obligations or for other reasons.
If we issue securities, our existing stockholders may experience dilution or the new securities may have rights senior to those
of our common stock. In addition, the terms of these securities could impose restrictions on our operations. Future sales of our
common stock, the perception that such sales could occur or the availability for future sale of shares of our common stock or securities
convertible into or exercisable for our common stock could adversely affect the market prices of our common stock prevailing from
time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 13, 2012, we had:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>8,725,366 shares of common stock that were subject to outstanding warrants;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>641,385 shares of common stock that were subject to options; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>$17,824,520 of outstanding notes that were convertible into a maximum of 3,975,206 shares of common stock, subject to adjustment.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have never paid dividends on
our common stock and do not expect to pay dividends in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to invest all available funds
to finance our growth. Therefore our stockholders cannot expect to receive any dividends on our common stock in the foreseeable
future. Even if we were to determine that a dividend could be declared, we could be precluded from paying dividends by restrictive
provisions of loans, leases or other financing documents or by legal prohibitions under applicable corporate law.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain statements included in this prospectus
and any prospectus supplement are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, which we refer to as the Securities Act.&nbsp;&nbsp;All statements other than statements of historical facts contained
in this prospectus and any prospectus supplement, including statements regarding our plans, objectives, goals, strategies, future
events, capital expenditures, future results, our competitive strengths, our business strategy and the trends in our industry are
forward-looking statements.&nbsp;&nbsp;The words &ldquo;believe,&rdquo; &ldquo;may,&rdquo; &ldquo;could,&rdquo; &ldquo;estimate,&rdquo;
&ldquo;continue,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo; &ldquo;should,&rdquo; &ldquo;plan,&rdquo; &ldquo;expect,&rdquo;
&ldquo;appear,&rdquo; &ldquo;future,&rdquo; &ldquo;likely,&rdquo; &ldquo;probably,&rdquo; &ldquo;suggest,&rdquo; &ldquo;goal,&rdquo;
&ldquo;potential&rdquo; and similar expressions, as they relate to us, are intended to identify forward-looking statements.&nbsp;&nbsp;All
statements, other than statements of historical fact, included in this prospectus and any prospectus supplement regarding our financial
position, business strategy and plans or objectives for future operations are forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking
statements.&nbsp;&nbsp;For example, and in addition&nbsp;to the &ldquo;Risk Factors&rdquo; discussed elsewhere in this prospectus,
risks and uncertainties can arise with changes in:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Failure of our systems to be accepted by parking garage builders;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Failure of our systems to perform as we expect in commercial operation;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>A significant decline in the rate of construction or remodeling of parking garages or significant delays in the construction
or remodeling of parking garages;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to effectively market our systems;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The development by a competitor of a comparable or superior system;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to manage our anticipated growth by recruiting and training experienced personnel and implementing infrastructure
changes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our indebtedness and ability to meet obligations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to become profitable;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to estimate contract expenses and customer requirements and deliver systems on a timely basis;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to protect our intellectual property;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Our inability to finance our expected growth; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Enactment of laws or regulations that make our systems less effective or more costly.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Readers are cautioned not to place undue reliance on any forward-looking
statement, which reflects management&rsquo;s analysis only as of the date of the statement.&nbsp;&nbsp;Except as required by applicable
law or regulation, we do not undertake, and specifically disclaim any obligation to update or revise any forward-looking statements
to reflect any changed assumptions, any unanticipated events or any changes in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, you should refer to the &ldquo;Risk
Factors&rdquo; section of this prospectus beginning on page&nbsp;5 for a discussion of factors that may cause our actual results
to differ materially from those which may be inferred from our forward-looking statements.&nbsp;&nbsp;As a result of these factors,
the forward-looking statements in this prospectus and any prospectus supplement will prove to be accurate.&nbsp;&nbsp;Furthermore,
if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.&nbsp;&nbsp;In light of the significant
uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us
or any other person that we will achieve our objectives and plans in any specified time frame, if at all.&nbsp;&nbsp;Accordingly,
you should not place undue reliance on these forward-looking statements.&nbsp;&nbsp;All subsequent written and oral forward-looking
statements attributable to us or the persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary
statements.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">USE OF PROCEEDS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will not receive any proceeds from the
sale of the securities offered by the selling securityholders, except that we may receive the exercise price from the exercise
of the warrants to purchase common stock for the underlying common stock to the extent the cashless exercise provision contained
in the warrants is not utilized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If all warrants are exercised for cash at
an exercise price of $5.00 per share, we would receive gross proceeds of approximately $6.5 million. We intend to use any proceeds
we may receive from the cash exercise of the warrants for working capital and other general corporate purposes. There is no assurance
that any or all of the warrants will ever be exercised for cash or at all.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">DIVIDEND POLICY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have never declared or paid any dividends
on our capital stock and do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently
expect to retain our future earnings, if any, for use in the operation and expansion or our business. Any future decision to pay
cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results
of operations, capital requirements and other factors our board of directors may deem relevant. The notes prohibit us and our subsidiaries
while the notes are outstanding from declaring or paying any dividends to any holder(s) of our common stock or such subsidiaries
(other than dividends and distributions from a subsidiary to us).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">MARKET FOR COMMON
EQUITY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is quoted on the OTCQB
tier of the OTC Markets, under the symbol &ldquo;BMER&rdquo;. As of September 13, 2012, we had 7,399,086 shares of common stock
issued and outstanding. As of September 13, 2012, there were approximately 610 record holders. The market for our common stock
is limited, sporadic and highly volatile. Since our 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 &ldquo;pink sheets&rdquo;. It is possible that
no active public market with significant liquidity will ever develop. Thus, investors run the risk of never being able to sell
their shares. The last reported closing bid price per share of our common stock on September 12, 2012, was $3.80.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the range
of high and low bid quotations for our common stock for each fiscal quarter for the fiscal years ended September 30, 2011 and 2010
and for the first three fiscal quarters and the fourth fiscal quarter through a recent date of the fiscal year ending September
30, 2012. These quotations represent prices between dealers and do not include retail mark-ups, mark-downs or commissions. They
do not necessarily represent actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Bid Range</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">High</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Low</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Fiscal Year 2012:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; padding-left: 11.7pt">Fourth Quarter (through September 12, 2012)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4.60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">3.80</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.51</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10.01</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.10</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Fiscal Year 2011:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12.40</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10.60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Fiscal Year 2010:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.20</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 11.7pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 11.7pt">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16.20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">MANAGEMENT&rsquo;S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following is management&rsquo;s discussion
and analysis of our consolidated financial condition, changes in financial condition and results of operations, liquidity and capital
resources presented in the consolidated financial statements included in this prospectus, beginning at page F-1. This discussion
should be read in conjunction with the included consolidated financial statements and the notes thereto.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Revenue Recognition</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues from the sales of RoboticValet&trade;
systems will be recognized using the percentage of completion method, whereby revenue and the related gross profit is determined
by comparing the actual costs incurred to date for the project to the total estimated project costs at completion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue from a project that is rail based
and generally completed over a period exceeding one year is recognized using the percentage of completion method, whereby revenue
and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total estimated
project costs at completion. Project costs generally include all material and shipping costs, our direct labor, subcontractor costs
and an allocation of indirect costs related to the direct labor. Changes in the project scope, site conditions, staff performance
and delays or problems with the equipment used on the project can result in increased costs that may not be billable or accepted
by the customer and a loss or lower profit from what was originally anticipated at the time of the proposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Estimates for the costs to complete the
project are periodically updated by management during the performance of the project. Provisions for changes in estimated costs
and losses, if any, on uncompleted projects are made in the period in which such losses are determined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may have service contracts in the future
after the contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed
according to the terms of the contract.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Liquidity and Capital Resources</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Cash</FONT>
and cash equivalents for the nine months ended June 30, 2012 increased by $3,195,508 to $3,261,098 as of June 30, 2012. At the
present time, our working capital together with cash from ongoing projects are sufficient to support our marketing activities,
administrative requirements and existing projects. However, to implement our full business plan, we may require additional funds
during the fiscal year ending September, 2013, and would anticipate seeking to raise these funds through public or private debt
or equity offerings, including offerings to our existing security holders. In addition, we may seek to restructure our existing
liabilities and debt. There can be no assurance that the capital we require to meet our operating needs will be available to us
on favorable terms, or at all. If we are unsuccessful in raising sufficient capital, we may be required to curtail our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For <FONT STYLE="font-size: 10pt">the</FONT>
nine months ended June 30, 2012, we had a net loss of $13,378,735. Included in this net loss were several non-cash expenses that
did not decrease liquidity. These non-cash expenses include depreciation of $183,907, amortization of discount on convertible debt
of $1,414,594, issuance of common stock for interest of $469,160, issuance of common stock for services of $50,001, a loss on equity
investment of $105,426, expenses from the issuance of stock options of $472,399 and the issuance of warrants of $680,554, and a
non-cash loss on the fair value of derivative of $2,579,818. Cash decreased as we experienced a nine month increase in inventories
of $82,030, in security deposit of $20,825, in prepaid expenses and other assets of $21,892, in estimated loss on uncompleted contract
of $443,631, and in restricted cash of $593,228, which represents cash received on a rack and rail project and placed in escrow
until certain milestones are reached. Additionally, decreases in accounts payable and accrued liabilities of $100,356 and in deposits
payable of $55,000 contributed to decreased liquidity. These items were offset by a decrease in notes receivable of $16,748, in
accounts receivable of $185,976, and in costs in excess of billings of $204,302, and in increases in due to related party of $132,457
and in billings in excess of costs of $514,408.<B> </B>After reflecting the net changes in assets and liabilities, net cash used
in operations was $6,798,685 for the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the fiscal year ended September 30,
2011, we had a net loss of $19,102,004. Included in the net loss were non-cash expenses for depreciation of $52,006, a loss on
disposal of equipment of $1,893 and a loss on equity investment of $153,019. We incurred additional non-cash expenses from the
issuance of stock options of $1,973,634 and the issuance of warrants of $8,127,272, which included expenses in the amount of $3,899,866
related to financing. Offsetting the use of cash from operations were year-over-year increases in accounts receivable of $175,731,
in notes receivable (non-current) of $913, in costs in excess of billings of $521,213 and year-over-year decreases in deposits
payable of $65,000 and in billings in excess of costs and estimated earned profits on uncompleted contracts of $48,186. These items
were partially offset by increases in notes receivable of $8,710, in inventories of $63,572, in prepaid expenses and other assets
of $2,889, in accounts payable and accrued liabilities of $223,273, in due to related party of $283,466 and in estimated loss on
uncompleted contract of $188,484. After reflecting the net changes in assets and liabilities, net cash used in operations was $8,834,829
for the year ended September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financing activities provided $10,278,503
for the nine months ended June 30, 2012. Net cash provided by financing activities consisted of $2,176,000 of proceeds from notes
payable and $9,825,000 of proceeds from private placements of convertible notes and warrants, offset by $1,722,497 of note repayments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financing activities provided $6,496,641
for the year ended September 30, 2011, a decrease of $3,844,392 from the year ended September 30, 2010. Net cash provided by financing
activities consisted of $5,725,000 of proceeds from loans payable and $1,199,999 of proceeds from private placements of common
stock, offset by $428,358 of loan repayments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the nine months ended June 30, 2012,
net cash used in investing activities consisted of an increase in equity investment of $186,600 and an increase in property, plant
and equipment of $97,710. Accordingly, net cash used in investing activities was $284,310.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the fiscal year ended September 30,
2011, net cash used in investing activities consisted of an increase in equity investment of $247,395 and an increase in property,
plant and equipment of $1,633,189, which included $1,523,097 of construction in progress for the robotic system to be built in
the town of Hamburg, located in Hardyston Township, New Jersey. Accordingly, net cash used in investing activities was $1,880,584.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There were no off-balance sheet arrangements
during the fiscal year ended September 30, 2011 or the nine months ended June 30, 2012 that have or are reasonably likely to have
a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to our interests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In November and December 2011, referred
to as the 2011 offering, we issued to subscribers 6% convertible promissory notes due in 2016 in the aggregate principal amount
of approximately $11.6 million, referred to as the 2011 notes, and five-year warrants to purchase common stock in a private placement,
referred to as the 2011 warrants. In connection with the 2011 offering, we received cash proceeds of approximately $5.0 million
and refinanced approximately $6.6 million of then existing short-term indebtedness. For each $100,000 invested, a subscriber was
issued a $100,000 principal amount 2011 note and 2011 warrants to purchase 23,530 shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the offering, the following
related parties converted indebtedness in the amounts and for the 2011 notes and warrants listed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Indebtedness&nbsp;Converted</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Notes&nbsp;issued&nbsp;in<BR> Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;issued&nbsp;in<BR> Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 46%; text-align: left">HSK Funding Inc.<SUP>(1)</SUP></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">254,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">254,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">59,765</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Lake Isle Corporation<SUP>(2)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,761,917</TD><TD STYLE="text-align: left">(10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,761,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">414,570</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Christopher Mulvihill<SUP>(3)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,451,000</TD><TD STYLE="text-align: left">(11)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,451,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">341,412</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.25in; padding-left: 0.25in">James Mulvihill TTEE Sunset Group Inc. PSP<SUP>(4)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">253,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">253,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,745</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">MRP Holdings LLC and Mark R Patterson Revocable Trust<SUP>(5)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">608,014</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">608,014</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,063</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sail Energy LLC<SUP>(6)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">300,142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">300,142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,622</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stan Checketts Properties, L.C.<SUP>(7)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">133,571</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">133,571</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,429</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>SB&amp;G Properties LLC<SUP>(8)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">220,763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">220,763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51,945</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Venturetek L.P.<SUP>(9)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">292,461</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">292,461</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,815</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<HR ALIGN="LEFT" NOSHADE SIZE="1" STYLE="color: Black; width: 25%; margin-top: 0; margin-bottom: 0">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>HSK Funding Inc. is a principal stockholder and a member of SB&amp;G Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>Gail Mulvihill, the individual who exercises sole voting and investment control over Lake Isle Corporation, is the mother of
Christopher Mulvihill, the Company&rsquo;s President and is a principal stockholder. Lake Isle Corporation is a member of SB&amp;G
Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>Christopher Mulvihill is the Company&rsquo;s President and director.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>James Mulvihill is the brother of Christopher Mulvihill and son of Gail Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>MRP Holdings LLC, and Mark R Patterson Revocable Trust are owned by Mark Patterson, the Company&rsquo;s Chief Executive Officer
and director.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD>Sail Energy LLC is owned by Gail Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD>Stan Checketts Properties, L.C. is owned by Stan Checketts, the Chief Executive Officer of the Company&rsquo;s wholly owned
subsidiary and director of the Company, and is a principal stockholder. Stan Checketts Properties is a member of SB&amp;G Properties
LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD>SB&amp;G Properties LLC is owned by HSK Funding Inc., Stan Checketts Properties, Lake Isle Corporation and Venturetek L.P.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD>Venturetek L.P. is a principal stockholder and a member of SB&amp;G Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD>Included in this balance is $1,000,000 of indebtedness resulting from a bank line of credit that Lake Isle Corp. caused to
be paid in full. Accordingly, the Company became indebted to Lake Isle Corp for $1,000,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD>On October 28, 2011, Atlantic and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt
owed to it by the Company to Christopher Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2011 notes are convertible into common
stock at $4.25 per share, referred to as the Conversion Price, subject to weighted average adjustment for issuances of common stock
or common stock equivalents below the Conversion Price, subject to certain exceptions. The 2011 notes are due on the five year
anniversary of the respective date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest accrues on the 2011 notes at 6%
per annum. Interest is payable quarterly, commencing on December 31, 2011, at our option, interest may be payable in: (i) cash
or (ii) shares of the common stock. If we elect to pay interest in shares of common stock on an interest payment date, the number
of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable on such
interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the last sale price of the common stock
during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date, referred to as the average price, if the average daily trading volume, or ADTV, of the common stock for the ten (10) trading
days prior to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal to or greater than
$100,000, it will be the average price, and not the conversion price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The outstanding principal amount of the
2011 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in
effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2011 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such
30 trading day period equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an event of default as defined in the
2011 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2011 notes then
outstanding to be, due and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For so long as the 2011 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2011 notes, we
may not:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2011 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of common stock or such
subsidiaries (other than dividends and distributions from a subsidiary to us) or (ii) purchase or otherwise acquire for value,
directly or indirectly, any shares or other equity security of us, other than the 2011 notes or warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2011 warrants are exercisable at $4.25
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Cashless
exercise is permitted if the average trading volume of our common stock during at least five (5) of the ten (10) consecutive trading
days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of
the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise. In certain
instances, a holder shall not be permitted to exercise the warrant if such exercise would result in such holder&rsquo;s total ownership
of our common stock exceeding 4.9%. The 2011 warrants expire five years from the respective date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the 2011 offering, we
paid a placement agent an aggregate cash fee of approximately $244,000 for its services as placement agent. We issued warrants
to the placement agent to purchase an aggregate of 109,177 shares of common stock, which warrants expire five years from the respective
date of issuance and contain substantially the same terms as those issued to subscribers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June and July of 2012, we issued $6.2
million aggregate principal amount of 6% convertible promissory notes due in 2017 and warrants to purchase 1,240,000 shares of
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the 2012 offering, the
following related parties of us participated in the 2012 offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Notes&nbsp;issued&nbsp;in<BR> Offering</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;issued&nbsp;in<BR> Offering</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%; text-align: left">MRP Holdings LLC(1)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">150,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">30,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sail Energy, LLC(2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">510,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Heather Mulvihill(3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">IA 545 Madison Assoc.(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Burton I. Koffman (4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">David Kent and Christine W. Koch(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company&rsquo;s Chief Executive Officer and a director.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company&rsquo;s
President and director.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>David Kent Koch is the Company&rsquo;s Chief Operating Officer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2012 notes are 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. Interest
accrues on the 2012 notes at 6% per annum. Interest is payable quarterly, commencing on June 30, 2012. At our option, interest
may be payable in: (i) cash or (ii) shares of the Common Stock. If the we elect to pay interest in shares of our common stock on
an interest payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued
and unpaid interest payable on such interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the
last sale price of the common stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately
preceding such interest payment date, or the average price, if the ADTV of the common stock for the ten (10) trading days prior
to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal to or greater than $100,000,
it will be the average price, and not the conversion price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The outstanding principal amount of the
2012 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the 2012 notes plus accrued and unpaid interest thereon, by the conversion price
in effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2012 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933, as amended, without restriction as to volume or manner of sale, and (iii) the ADTV during such
30 trading day period equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an event of default as defined in the
2012 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 notes then
outstanding to be due and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For so long as the 2012 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2012 notes, we
may not:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the 2012 notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2012 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock or such
subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii) purchase or otherwise acquire for
value, directly or indirectly, any shares or other equity security of us, other than the 2012 notes or 2012 warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2012 warrants are exercisable at $5.00
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally,
the exercise price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of our common
stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the warrant if
such exercise would result in such holder&rsquo;s total ownership of our common stock exceeding 4.9%. The warrants expire on June
14, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the 2012 offering, we
paid a placement agent and another registered broker-dealer cash fees of approximately $274,000 in the aggregate. We issued to
the placement agent warrants, referred to as the Placement Agent Warrants to purchase 41,700 shares of common stock. The Placement
Agent Warrants contain substantially the same terms as those issued to subscribers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a registration rights
agreement with the subscribers. Pursuant to the registration rights agreement, we agreed to file a registration statement within
90 days after the final closing date of the 2012 offering which must occur no later than 30 days from June 14, 2012, or the Closing
Date, to register for resale the shares of common stock issuable upon conversion of the 2012 notes and exercise of the 2012 warrants
and Placement Agent Warrants, collectively referred to as the Registrable Shares. In the event that the SEC limits the number of
Registrable Shares that may be included in the registration statement, we shall include only those Registrable Shares permitted
by the SEC and shall file additional registration statements at the earliest practical date as we are permitted to do so in accordance
with SEC guidelines. We shall use our best efforts to cause (i) the Registration Statement to be effective within 150 days of the
closing date, and (ii) any additional registration statements to be declared effective within 90 days of the required filing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Shares an amount
equal to 1% of the original principal amount of the investor&rsquo;s 2012 note, multiplied by a fraction with the numerator equal
to the number of Registrable Shares that were required to be included in the Registration Statement which is not so filed, declared
effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total
number of shares issued or issuable to the Investor upon conversion of the 2012 notes and exercise of the 2012 warrants purchased
pursuant to the Subscription Agreement and owned by such holder.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Results of Operations</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Nine Months Ended June 30, 2012
Compared to Nine Months Ended June 20, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Revenues</FONT>
were $477,290 for the nine months ended June 30, 2012 compared with $1,319,620 for the nine months ended June 30, 2011.&nbsp;&nbsp;The
decrease was due to the rail-based parking system project that commenced in fiscal 2010 being substantially complete during the
first fiscal quarter of 2011.&nbsp;&nbsp;This revenue was recognized using the percentage of completion method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of goods sold were $2,069,846 for the
nine months ended June 30, 2012 compared with $2,496,467 for nine months ended June 30, 2011.&nbsp;&nbsp;The decrease was due to
the rail-based parking system project that commenced in fiscal 2010 being substantially complete during the first fiscal quarter
of 2011. In both years, cost of goods sold exceeded revenues due to the continued loss on the rack and rail project that commenced
in 2010. However, during the nine months ended June 30, 2012, we allocated additional resources that incurred expenses of approximately
$1,000,000 for the rail-based parking project that commenced in fiscal 2010. In addition to this, the Company incurred an expense
of $443,631 during the nine months ended June 30, 2012, related to the estimated loss&nbsp;that will be incurred on the rail-based
system.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Sales and marketing expenses were $877,831
during the nine months ended June 30, 2012 compared with $1,891,800 during the nine months ended June 30, 2011, for a decrease
of $1,013,969. The decrease was primarily the result of incurring a non-cash expense of $1,000,000 for the issuance of stock options
during the nine months ended June 30, 2011. Advertising expenses for the nine months ended June 30, 2012 and 2011 were $114,783
and $201,374, respectively. As of June 30, 2012 and 2011, we employed four full-time salesmen and one full-time support person,
whose salaries are recorded under sales and marketing expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">General and administrative expenses were
$5,165,169 during the nine months ended June 30, 2012 compared with $6,842,084 during the nine months ended June 30, 2011, for
a decrease of $1,676,915. This decrease was primarily due to a reduction of approximately $3,250,000 in non-cash expenses incurred
in connection with issuances of stock options and warrants. Offsetting this reduction were increases of approximately $940,000
of costs related to fund raising, approximately $418,000 of payroll and payroll related expenses, and an increase of approximately
$200,000 related to professional fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Research and development expenses were $1,033,435
during the nine months ended June 30, 2012 compared with $1,792,653 during the nine months ended June 30, 2011, for a decrease
of $759,218. The decrease was due to less resources being needed to complete existing research and development projects during
the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Depreciation and amortization expenses were
$183,907 during the nine months ended June 30, 2012 compared to $38,209 during the nine months ended June 30, 2011, for an increase
of $145,698. This increase was the result of placing the demonstration facility at Crystal Springs into service and purchasing
additional fixed assets during the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest expense was $486,299 during the
nine months ended June 30, 2012, compared with $60,858 during the nine months ended June 30, 2011, for an increase of $425,441.
This increase is due to an increase in outstanding indebtedness due to the issuance of notes in the offerings in November and December
2011 and June 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financing costs were $0 during the nine
months ended June 30, 2012, compared with $3,899,866 during the nine months ended June 30, 2011. The expenses incurred during the
nine months ended June 30, 2011 were for the issuance of warrants related to drawing down on a line of credit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the Offering, the Company
recorded a discount for the BCF and the attached warrants. In addition, the placement agent was granted warrants similar in their
terms to those issued to the debt holders. These warrants and the BCF were deemed not indexed to the Company&rsquo;s common stock
and accordingly the Company recorded a derivative liability. The derivative liability is required to be revalued at each interim
and annual reporting date until such time that it is settled. This revaluation resulted in a loss on fair value of derivative of
$2,579,818 during the nine months ended June 30, 2012. With respect to the 2012 Offering, the Company recorded a discount for the
BCF and the attached warrants. In addition, the placement agent was granted warrants similar in their terms to those issued to
the debt holders. The Company has determined that the 2012 Offering is indexed to the Company&rsquo;s common stock and has not
recorded a derivative liability. During the nine months ended June 30, 2012 the Company amortized an aggregate of $1,414,594 of
the of debt discount for the Offering and the 2012 Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of June 30, 2012, we had ten contracts.
Two contracts, both rack and rail parking projects, were in the process of being implemented. The other eight outstanding contracts,
all of which are for projects awaiting various approvals and financing which, if obtained, are expected to result in these contracts
generating revenue in the future for our company.&nbsp; Because it is uncertain as to whether any of these projects will ever receive
the permitting or financing required to move forward, there can be no assurances that these contracts will generate any revenue.&nbsp;
Of these eight contracts, one is for a rack and rail self-storage system, one is for a design contract for a RoboticValet&trade;
parking system and the other six are for RoboticValet&trade; parking systems.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Fiscal Year 2011 Compared to Fiscal
Year 2010</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues were $1,591,948 for the fiscal
year ended September 30, 2011 compared with $718,530 the fiscal year ended September 30, 2010, for an increase of $873,418. The
increase was due to the continuing construction of a rail-based parking system that commenced in fiscal 2010. This revenue was
recognized using the percentage of completion method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of goods sold were $3,241,531 for the
fiscal year ended September 30, 2011 compared with $715,135 for the fiscal year ended September 30, 2010, for an increase of $2,526,396.
The increase was due to the continuing construction of the same rail-based parking system that commenced in fiscal 2010. We recognized
a gross loss of $1,649,583 for the year ended September 30, 2011, which included an expense of $188,484 as a provision for the
remaining loss to be incurred on the project. As a result of this being the first automated parking project of its size that we
have executed, we had a limited ability to properly estimate the time and resources required to fully design, engineer, manufacture,
ship, install, and commission prior to executing the project, and as a result our costs exceeded revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Sales and marketing expenses were $2,176,724
during the fiscal year ended September 30, 2011 compared with $1,144,513 during the fiscal year ended September 30, 2010, for an
increase of $1,032,211. The increase was primarily due to an expense of $1,000,000 incurred from the issuance of 200,000 fully
vested options as executive compensation. Additional increases are due to payroll, travel and trade show expenses incurred by our
salesmen. The advertising expenses for the fiscal year ended September 30, 2011 and 2010 were $242,717 and $190,326, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">General and administrative expenses were
$9,003,046 during the fiscal year ended September 30, 2011 compared with $11,652,419 during the fiscal year ended September 30,
2010, for a decrease of $2,649,373. This decrease was primarily due to our recognizing $5,201,040 in stock-based compensation during
the year ended September 30, 2011, as compared with $8,415,104 during the fiscal year ended September 30, 2010. Stock-based compensation
during the year ended September 30, 2011 was comprised of expenses aggregating $973,634 resulting from the grant of stock options
to purchase a total of 50,000 fully vested shares, 35,750 shares that have vested during the year ended September 30, 2011 and
43,750 shares that vest in the future, the grant of warrants totaling $4,202,406 as executive compensation to purchase a total
of 970,000 shares of common stock and $25,000 as compensation to a consultant to purchase a total of 5,000 shares of common stock.
These issuances were used to attract and retain employees and management and we intend to continue to issue equity as necessary
to retain our employees and management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Research and development expenses were $2,202,020
during the fiscal year ended September 30, 2011 compared with $2,669,331 during the fiscal year ended September 30, 2010, for a
decrease of $467,311. This decrease was a result of us incurring less expense related to the research and development of a RoboticValet&trade;
system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Depreciation and amortization was $52,006
during the fiscal year ended September 30, 2011 compared to $49,089 during the fiscal year ended September 30, 2010, for an increase
of $2,917. This increase was the result of depreciation on additional fixed assets purchased during the fiscal year ended September
30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest income was $1,796 during the fiscal
year ended September 30, 2011, compared with $5,977 during the fiscal year ended September 30, 2010, for a decrease of $4,181.
This decrease was the result of a note receivable to CSExpress, LLC being repaid in full by December 2010 as well as a decrease
in our overall cash balance in the bank.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest expense was $113,657 during the
fiscal year ended September 30, 2011, compared with $168,408 during the fiscal year ended September 30, 2010, for a decrease of
$54,751. This decrease was due to repayment and conversion of debt during the fiscal year ended 2010 as well as the conversion
of debt to equity that took place on November 24, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Financing costs were $3,899,866 for the
year ended September 30, 2011, compared with $0 for the year ended September 30, 2010. This increase was the result of recording
expenses from the issuance of warrants to purchase a total of 650,000 shares of common stock in connection with borrowings under
a line of credit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of the end of fiscal year 2011, we had
nine contracts. One contract, for a rack and rail parking project, was in the process of being implemented. Eight additional outstanding
contracts, all of which are for projects awaiting various approvals and financing which, if obtained, are expected to result in
these contracts generating revenue in the future for us. Because it is uncertain as to whether any of these projects will ever
receive the permitting or financing required to move forward, there can be no assurances that these contracts will generate any
revenue. Of these eight contracts, one is for a rack and rail self-storage system, one is for a rack and rail parking project,
one is for a design contract for a RoboticValet&trade; parking system and the other five are for RoboticValet&trade; parking systems.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Critical Accounting Policies and Estimates</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have identified the accounting policies
below as critical to its business operations and the understanding of its results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Principles of consolidation</I> &ndash;
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. We believe that a classified balance sheet provides a more meaningful presentation, consistent with the
business cycles of our operations. All significant inter-company accounts and transactions have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Cash</I> <I>and Cash Equivalents </I>&ndash;
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Accounts receivable</I> &ndash; 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,
2011 and June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Property and equipment</I> &ndash; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 &ldquo;Costs and estimated earned profits in excess of billings on uncompleted contracts&rdquo; represents revenues recognized
in advance of amounts billed. The liability &ldquo;Billings in excess of costs and estimated earned profits on uncompleted contracts&rdquo;
represents billings in advance of revenues recognized and contemplated losses on contracts in progress.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Research and development</I> &ndash;
Pursuant to ASC 730, research and development costs are expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Inventories</I> - 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Stock-based compensation</I> - We adopted
ASC 718-10-25, 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&rsquo; 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-Scholes method is also used.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Revenue recognition</I> &ndash; Revenues
from the sales of RoboticValet&trade; and rack and rail systems are recognized using the percentage of completion method, whereby
revenue and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total
estimated project costs at completion. Project costs generally include all material and shipping costs, our direct labor, subcontractor
costs and an allocation of indirect costs related to the direct labor. Changes in the project scope, site conditions, staff performance
and delays or problems with the equipment used on the project can result in increased costs that may not be billable or accepted
by the customer and a loss or lower profit from what was originally anticipated at the time of the proposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Estimates for the costs to complete the
project are periodically updated by management during the performance of the project. Provisions for changes in estimated costs
and losses, if any, on uncompleted projects are made in the period in which such losses are determined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When the current estimate of total contract
costs exceeds the current estimate of total contract revenues, a provision for the entire loss on the contract is made. Losses
are recognized in the period in which they become evident under the percentage-of-completion method. The loss is computed on the
basis of the total estimated costs to complete the contract, including the contract costs incurred to date plus the estimated costs
to complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may have service contracts in the future
after the contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed
according to the terms of the contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Warranty Reserves</I> - We provide warranty
coverage on our products for a specified time as stipulated in its sales contracts. At the time of completion of a project we will
record a warranty reserve for estimated costs in connection with future warranty claims. The amount of warranty reserve is based
primarily on the estimated number of products under warranty and historical costs to service warranty claims. Management periodically
assesses the adequacy of the reserves based on these factors and adjusts the reserve accordingly.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Recent Accounting Pronouncements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, the FASB issued Accounting
Standards Update, referred to as ASU, No. 2011-04, &ldquo;Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs.&rdquo; The amendments in this ASU are effective during interim and annual periods beginning after December
15, 2011. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2011, the FASB issued ASU No. 2011-05,
&ldquo;Presentation of Comprehensive Income.&rdquo; Under the amendments in this ASU, an entity has two options for presenting
its total comprehensive income: to present total comprehensive income and its components along with the components of net income
in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be
applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15,
2011, with early adoption permitted. The adoption of ASU No. 2011-05 will not have any material impact on our consolidated financial
position and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2011, the FASB issued ASU No.
2011-08, Intangibles &mdash; Goodwill and Other (Topic 350). This ASU amends FASB ASC Topic 350. This amendment specifies the change
in method for determining the potential impairment of goodwill. It includes examples of circumstances and events that the entity
should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. The adoption does not have any material impact on our consolidated financial position and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">OUR BUSINESS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Background and General Activities</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Background</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our company, Boomerang Systems, Inc, is
engaged in the business of marketing, designing, engineering, manufacturing, installing and supporting its own line of fully automated
parking systems and fully automated self storage systems, with corporate and sales offices in Florham Park, New Jersey, and a research,
design, production and testing center in Logan, Utah.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Boomerang entered the business of automation
by developing and marketing automated self-storage systems to provide the space efficiency, security, and convenience of 100% &ldquo;drive-up
accessible&rdquo; vertical self-storage in densely populated urban locations with high real estate values. This system, which we
refer to as Boomerang&rsquo;s Automated Locker Retrieval System or ALRS, stores steel storage containers in a steel rack system
with a central open atrium and shuttles that move along a rail (i.e., &ldquo;rack &amp; rail&rdquo;) transport containers back
and forth between storage locations and ground floor loading bays.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">While promoting our self storage system,
we received numerous inquiries to provide space-saving automated parking systems. In 2007, we began to develop automated parking
systems or APS, to expand our product line and enter that business. While we believe the automated self-storage has significant
potential, we believe the demand for automated parking systems is substantially larger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To serve this market, we have developed
two automated parking product lines, which we refer to as &ldquo;rack &amp; rail&rdquo; systems and &ldquo;RoboticValet&trade;&rdquo;
systems. While our rack &amp; rail systems compete with other rail or track based automated parking systems offered by other automated
parking providers, we believe that our RoboticValet system is unique in the marketplace with distinct advantages over other systems
historically offered by competitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Boomerang has the rights to various trademarks,
trade names or service marks used in our business including RoboticValet&trade; and TrafficMaster&trade;. In addition, we have
filed patent applications with respect to certain aspects of our automated parking and self-storage systems.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">General Activities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since we entered the business of automation
in 2007, we have manufactured and implemented nine systems. Six of these systems were developed as prototypes at our testing center
in Utah. The first of these test systems was an automated self-storage system. The next three were rack &amp; rail automated parking
systems, and the next two were RoboticValet parking systems. While these test systems have not generated any revenue for our company,
we believe the development of these systems has been instrumental in advancing our understanding of the business, our proprietary
technology and our implementation capabilities. In addition, being able to demonstrate these systems to prospective customers has
proven useful in advancing our sales efforts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The other three systems that we have manufactured
were built for commercial use. Two of these systems were installed for third parties in 2008. The first system is a fully automated
self storage facility installed in New Kensington, a suburb of Pittsburgh, PA for a self storage operator with multiple locations
in the greater Pittsburgh area. The facility is a six level high steel rack system that houses 110 self storage containers, 60
of which are partitioned, so there are actually 170 leasable units in the system. Storage units in the system are retrieved and
delivered automatically to one of five drive up accessible loading bays when requested by tenants via a kiosk adjacent to the loading
bay or remotely via an access control panel upon the tenant entering the property. Following the opening of this facility in Pennsylvania,
we are aware of two automated self-storage facilities being implemented by a competitor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second system installed for a commercial
use in 2008 was a rack &amp; rail automated parking system installed in San Juan del Rio, Queretaro, Mexico. This six level system
has the capacity to store eleven vehicles which can be retrieved to a ground floor loading bay via a kiosk. The system is used
by the customer for employee parking.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The third system in commercial use is an
APS, installed at the Crystal Springs Golf &amp; Spa Resort complex in Sussex County, NJ on property owned by Route 94 Development
Corporation. Route 94 Development Corporation is principally owned by Gail Mulvihill, who also has a substantial ownership interest
in Boomerang and is the mother of Christopher Mulvihill, our President. The structure housing this system was built in 2010 and
the RoboticValet system was installed within the structure in 2011. Implementation of this system has not and will not produce
any revenue for us, however, we have the right to bring prospective customers to the site to demonstrate the system to them. While
we have been able to demonstrate our RoboticValet technology at our test facility in Utah, we believe that having this pilot facility
installed and operational provides prospective buyers a more substantial validation of the viability of our RoboticValet system,
since it serves as an demonstration of the RoboticValet system used in a commercial application. This facility also provides a
more convenient demonstration location for prospective customers located on the East Coast. This two level system is designed to
store up to 39 vehicles, with two ground level loading bays from which resort employees can store and retrieve vehicles. We received
the Certificate of Occupancy for this facility on October 3, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are currently in the process of installing
another two automated parking systems, both of which are rack and rail systems. The first of these systems is being installed on
Collins Avenue in Miami Beach, Florida, for a national real estate developer. This eight level system is designed to store up to
139 vehicles with two ground level loading bays from which drivers can store and retrieve their vehicles.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second rack and rail automated parking
system we are currently implementing is being installed at a museum in Stuart, Florida, where it is expected to be used to display
a collection of up to 55 antique cars. We anticipate these systems will be completed and operational prior to the end of 2012.
We have also entered into contracts to provide the following additional systems which we have not yet begun to install:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>ALRS (Automated Locker Retrieval System) to accommodate up to 38,304 rentable square feet of self storage space in British
Columbia, Canada.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 229 parking spaces in Wichita, Kansas.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 460 parking spaces in Hudson County, New Jersey.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 104 parking spaces in Abu Dhabi, UAE. (This project is contracted through
our joint venture, Boomerang Systems Middle East.)</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 854 parking spaces in Jackson, MS.</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 226 parking spaces in Hollywood, Florida.</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 110 parking spaces in Virginia. (This contract is for system design, not the
purchase of a system).</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 248 parking spaces in New Jersey.</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 252 parking spaces in California.</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 309 parking spaces in California.</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>RoboticValet Parking System to accommodate up to 439 parking spaces in California.</TD></TR></TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are in the process of designing these
systems which are currently under contract. At this time it is difficult to project when each of these contracted projects will
move forward and at what pace, because with each of these projects, the parking system is just one aspect of an overall larger
project such as an apartment building or hotel, and as such there are many factors outside our control that can affect the timing
of when our system is needed by our customer and when our customer can have the site will be prepared such that our system can
be installed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">It is also possible that in the course of
designing and engineering the system, we determine that we had previously underestimated the scope of the customer&rsquo;s requirements.
In such a situation, it is possible that we might not be able to negotiate an alternate solution and price with our customer which
might, in turn, result in a termination of our contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Previously, we estimated that we would start
manufacturing equipment for four additional projects (in addition to the two rack and rail parking projects) before the end of
calendar year 2012, but presently we estimate that we will commence manufacturing equipment for only one or two RoboticValet projects
before the end of 2012, and we estimate that we will commence manufacturing for five additional projects in calendar year 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that it will take an average of
about 12 months to manufacture and install a typical project., however, we have limited experience in executing projects of this
size and anticipate that executing multiple projects at the same time may affect our ability to deliver completed systems on a
consistent, timely basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that revenue on these projects
will be recognized on a percentage of completion basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Generally, our agreements with customers
provide that:</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our customers will purchase deliverables from us, consisting of equipment/materials and services, which, when combined, result
in a system that will be constructed to perform to certain specified criteria;</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>delivery of a working system is contingent upon a customer providing materials and services for which we were not contracted
to provide, in accordance with our specifications;</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>typically, we receive up front design fees before we commence design and engineering services;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the customer makes a series of progress payments to us as materials are fabricated, delivered, installed and tested, with final
payment typically being due 30 days following acceptance of the system by the customer;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the customer has the ability to terminate the contract if it is unable to obtain the necessary financing or approvals or if
there are material changes to the estimate we provided. If the customer terminates a contract, it must make any progress payments
due through the date of termination;</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>we typically provide a one-year warranty and, for a recurring monthly fee, an optional ongoing maintenance and service plan;
and</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>confidentiality agreements exist prohibiting our customers from sharing any of our proprietary information.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Product Lines</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Automated parking systems</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Even though conventional structured parking
garages (also known as multi-level parking, parking decks, parking garages, parkades, or parking ramps) are used extensively in
densely populated areas to minimize the amount of land consumed by parking, the three dimensional space consumed by these structures
still has a significant impact on the urban landscape. An alternative to these conventional parking structures is automated parking
systems or APS, which use machinery controlled by computers to automatically park vehicles in a structure without a human driver.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have developed a proprietary APS that
we believe has the potential to yield many benefits to real estate developers, consumers and society in general including the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Maximum Parking Density</I> &ndash; By
using tandem parking, eliminating the ramps, circulation driveways and passenger lifts typical in self park garages, our APS consume
significantly less space per vehicle than conventional self park garages, especially in cases of small or irregularly shaped sites.
While valet parking services can also be used to attain density in parking garages, valet labor can be expensive and undesirable
for a number of reasons. The increase in density from APS is attractive to real estate developers who wish to minimize the impact
of parking on their project such that they can reduce the amount of excavation for underground garages or reduce the amount of
valuable space consumed for above ground garages.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Improved Parking Experience</I> &ndash;
Unlike self-park garages where parkers must hunt for a convenient space, remember where they parked, and risk the possibility of
minor damage to their vehicles, users of APS park and retrieve their car from the same spacious parking bays conveniently located
near the building&rsquo;s access points. The experience is similar to the convenience of a valet garage, but allows the drivers
to lock their car and retain their keys, allowing them to maintain privacy, while reducing the risk of theft or damage that may
occur by leaving their car in the hands of a stranger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Fraud Prevention</I> &ndash; Parking
is a significant source of income in urban development projects, and parking garage operators are often one of the largest tenants
in the buildings they serve. With cash being handled by the operator and their employees, fraud can be a concern. Whether the employee
is under reporting income to the operator, or the operator is under reporting to the developer, there are opportunities for loss
and exposure that could prevent developers from realizing the full value of their parking assets. Installing an APS can mitigate
this issue by creating a record of every parking transaction, thereby exposing fraud.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Lower Insurance Premiums</I> &ndash;
Parking garages often pay high insurance premiums because of the disproportionately high number of claims for accidents, vandalism,
theft, and personal injury that occur in parking garages. We believe that the elimination of human occupancy inside the parking
facility greatly mitigates these risks and should result in lower insurance premiums.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Environmentally Friendly</I> &ndash;
Because vehicles are shut off before they are parked, there are no carbon emissions generated in an APS, and in the case of enclosed
garages, significantly less electricity is required for ventilation. In addition, due to the space efficient nature of APS, significantly
less materials are used in construction. Additionally, the robots used in the garage do not require lights to see, reducing the
amount of electricity used.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Faster Construction Time</I> &ndash;
We believe that using an automated parking garage can shorten a project&rsquo;s construction timeline leading to lower borrowing
costs and earning rent several months earlier. This is especially the case when an APS is installed below ground because the increased
density of an APS allows for elimination of the lowest basements, which are the most time consuming and costly to build.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">It is our belief that these benefits listed
above are evidenced by the widespread adoption of other APS in Europe and Asia. However, it should be noted that the U.S. market
has been slow to adopt these types of systems. While the number of these systems being built in the U.S. increased in recent years,
we believe the market has not realized its full potential for the reasons outlined below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Prior to developing our flagship product,
the Boomerang RoboticValet APS, we studied the existing APS market. Our meetings with real estate developers, architects, parking
garage design consultants, traffic engineers, general contractors, parking operators and building and fire code officials led us
to believe that despite all the potential benefits these systems could offer, the market for existing rail and track based APS
technology was limited, for four primary reasons:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Redundancy Concerns</I> &ndash; Because
the machinery in a rack or track based APS system travels on a rail through the center of the structure, a breakdown of machinery
could result in the entire system or a large portion of the system becoming largely incapacitated until such time that the machinery
can be fixed. In our experience, the possibility of such a single point of failure represents a significant risk that most real
estate developers, operators and financial backers are not willing to take.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Throughput Concerns</I> &ndash;Use of
a central rail for the transport of machinery results in a system in which, on any given level, one piece of machinery cannot navigate
past another. This results in traffic bottlenecks which limit the number of simultaneous transactions that can be processed within
the system. We believe this limitation has been a major concern of traffic engineers, parking design consultants and operators
who need to confirm that the system is capable of handling the inbound and outbound traffic they project will be generated during
peak hours of operation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Fire &amp; Life Safety Concerns</I> &ndash;
Typical rack &amp; rail systems require a floor-to-ceiling atrium in the center of the structure to accommodate retrieval machinery.
We believe building and fire officials have concerns that this floor-to-ceiling atrium results in a lack of fire separation between
levels as well as a falling hazard to fire and life safety personnel in the event they need to gain access to a burning car. Attempts
to mitigate the fire safety issues by adding catwalks, grating, and fire-proof coatings to the steel rack can make it cost prohibitive
to use rack &amp; rail systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Specialty Construction Concerns</I> &ndash;
While many architects, engineers, contractors and parking design consultants have experience with conventional solid concrete slab
garage structures, relatively few of these professionals have experience in the design, engineering or construction of specialized
steel rack structures or concrete shelf structures required to house a rail based automated parking system. We believe many real
estate developers are concerned that they cannot properly source these specialized structures to local professionals and would
prefer that the structure be sourced through the APS provider. We believe this poses a problem for APS providers, because it forces
them to be involved in the business of sourcing the structures to house their systems. We do not believe that is a scalable business
model, since local building conditions may vary considerably from market to market and requires the manufacturer to maintain a
physical presence in or near each market it intends to enter.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Boomerang&rsquo;s Rack &amp; Rail
Automated Parking Systems</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The first of our APS is a rail based product
line, which we refer to as our &ldquo;Rack &amp; Rail&rdquo; line since these systems store vehicles in a steel rack structure.
We were able to develop our Rack &amp; Rail parking system based on our self-storage technology. We believe these systems are substantially
similar to other competing rail or track based based systems already on the market. While our rack &amp; rail technology does not
adequately address the four concerns listed above, we believe that rack and rail systems provide the advantages of APS systems
generally. We also believe we have an advantage in the United States over foreign producers of rail based APS, because their solutions
may have to be imported or licensed from foreign countries. In addition to test systems that we have installed at our factory in
Logan, Utah, to date we have installed a rack and rail APS in Mexico, and we are in the process of installing one in Miami Beach,
Florida and another in Stuart, Florida.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Boomerang&rsquo;s RoboticValet
System</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second type of APS that we manufacture,
and what we believe is our flagship line, is the Boomerang RoboticValet System. At this time, we believe we are the only automated
parking provider capable of providing this type of system, which is markedly different from rack &amp; rail and track based systems
historically offered by our competitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The key component to this system is our
RoboticValet, an omni-directional, battery-powered robot that carries vehicles parked on self-supporting galvanized steel trays
to and from storage spaces by driving directly on a concrete slab surface without a rail. Unlike the machinery in our Rack &amp;
Rail based systems, the RoboticValet can travel in any direction anywhere in the garage, including underneath rows of parked vehicles.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The three key design modifications, which
we believe provide the enhanced functionality that makes the our RoboticValet unique are:</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Solid Concrete Slab Construction
Instead Of Custom Steel Racking</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Fire fighter access is easier and safer due to elimination of the open atrium;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Acceptable and cost-effective fire separation between floors;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Maintenance personnel can service equipment without needing do a safety harness to service equipment;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Concrete is stronger, safer, easier to engineer, and can be competitively bid in local markets; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Allows symbiotic relationship with industry players (No need for a design/build contract) such as local architects, structural
engineers and contractors who can participate in the process by sourcing the structure required to house the system.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Omni-Directional Robots Instead
Of Rail-Based Mechanisms</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Navigate through large &amp; irregularly shaped garages;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Move from floor-to-floor to react to demand spikes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Avoid creating bottlenecks in high traffic areas;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Attain a higher throughput than a rail based system with less equipment;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Multiple paths of travel provide redundancy that can&rsquo;t be achieved in a central rail system; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Easy to service. A disabled robot can be pushed into an empty parking space.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Self-Supporting Stacking Steel
Trays Instead Of Lifting Vehicles By Tires</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Robots can move freely underneath parked vehicles avoiding bottlenecks</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Multiple lanes of lateral movement means there is no single point of failure that can block traffic in the facility;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Vehicles lifted and moved without touching the vehicle;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Less likely to cause flat tires than systems that pick vehicles up by the tire, and fewer complications from packed snow, mud
flaps, and dangling mufflers; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Stacking five or more trays eliminates the need to return empty trays each time a car exits.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Boomerang&rsquo;s Automated Locker
Retrieval System</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to serve the self-storage market,
Boomerang has developed an ALRS that is a fully automated robotic self-storage system. This system allows self storage developers
to build vertically while keeping every rentable unit accessible to tenants from the ground floor. Our ALRS stores steel storage
containers in a steel rack with a central open atrium, where machinery moving along a rail transports containers between storage
locations in a steel rack and ground floor access bays. Containers are stored and retrieved by a tenants via an authorized access
code entered at a kiosk adjacent to drive up accessible loading bays located on grade. Containers can be partitioned and outfitted
with multiple access doors in order to allow for the creation of different sized rentable units.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe our ALRS provides customers with
the following benefits:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Greater Density </I>- This system yields a higher three dimensional density than can be achieved through conventional construction
methods resulting in more rentable square footage for the real estate developer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Convenient Curbside Loading </I>- Consumers have the convenience of access directly from a drive-up bay instead of bringing
their goods into an elevator and through hallways inside a building</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Improved Property Security &amp; Personal Safety </I>- Containers are stored inside the system and are inaccessible to anyone
without the access code. All access is from a small central common area that is easy to monitor and secure.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Reduced Common Area Maintenance &ndash; </I>Our ALRS requires substantially less common area to maintain, reducing the labor
for tasks such as cleaning hallways and changing light bulbs.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Remote Over-Locking Capability - </I>Tenants who are past due on rent can be automatically locked out of the system (over-locked)
at the push of a button.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><I>Reduced Fraud &ndash; </I>Opportunities for uncollected rents (due to employee fraud or negligence) are reduced, since there
is a record logged every time a unit is stored or retrieved in the system.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Marketing</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We employ four full-time salespeople and
one full-time support person. In addition, we retain independent representatives to market our system. We have also retained consultants
to assist us with new contracting opportunities in the United States and abroad. These consultants will typically receive a fee
equal to a percentage of any monies received by the Company on a particular project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our marketing activities are principally
directed at identifying and understanding potential customers and markets and educating government agencies, architects, engineers,
and contractors, as well as potential customers about our products and services. We are currently focused on markets in the United
States and Abu Dhabi, United Arab Emirates as well as elsewhere in the Middle East and India. We target the following markets:
public garages, hospitals, casinos, hotels, airports, residential apartments and condominiums, office complexes, car dealerships
and service facilities, and universities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We utilize the RoboticValet demonstration
unit in our manufacturing facility in Logan, Utah to demonstrate the capabilities of our system to potential customers. In addition,
the small RoboticValet parking facility we installed in 2011 at Crystal Springs Golf &amp; Spa Resort in the town of Hamburg, located
in the township of Hardyston, New Jersey not only functions in a commercial environment, but it also serves as a &ldquo;show room&rdquo;
for our customers, since we have an agreement with the resort that provides us access to the facility for the purpose of conducting
demonstrations. We received the Certificate of Occupancy on this demonstration facility in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2009, our wholly owned subsidiary,
Boomerang USA Corp. entered into a Shareholders Agreement with Tawreed Companies Representation, an entity established under the
laws of the Emirate of Abu Dhabi and the United Arab Emirates, to expand our business into Abu Dhabi and possibly elsewhere. The
material terms of the Shareholders Agreement are listed below:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Pursuant to the agreement, the parties incorporated Boomerang Systems Middle East LLC, referred to as BSME, a limited liability
company in the Emirate of Abu Dhabi on July 21, 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The duration of BSME is 5 years and will automatically be renewed for similar terms unless one party notifies the other of
its willingness to dissolve BSME 90 days before the expiration date.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Tawreed and Boomerang USA own 51% and 49%, respectively, of BSME, and all profits are to be split evenly and each party is
required to contribute an equal amount of capital when needed.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The board of directors is comprised of four members, with each party appointing two directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The agreement provides that Boomerang USA will supply BSME with systems at a price that Boomerang USA will receive a fair profit
margin. BSME may determine the price at which it sells systems to its customers.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>All intellectual property rights will remain the sole property of Boomerang USA at all times.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date BSME has generated only a small
deposit. BSME currently employs one full time architect who supports our sales and marketing efforts. To date, BSME has secured
one contract for a RoboticValet system to be installed in Abu Dhabi for 104 parking spaces. We are not certain of when we will
begin manufacturing or installing equipment for this project, because the developer is still seeking to secure financing and permitting
for the project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In February 2012, our wholly owned subsidiary,
Boomerang MP Holdings Inc., entered into an agreement with Stokes Industries-USA, LLC, to form a joint venture for the purpose
of marketing, selling and installing mechanical parking systems in North America. The material terms of the joint venture agreement
are listed below:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Pursuant to the agreement, the parties incorporated Boomerang-Stokes Mechanical Parking LLC, referred to as BSMP in the state
of New Jersey on February 15, 2012. The joint venture is authorized to do business as Boomerang Mechanical Parking.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Unless all directors and members shall mutually agree, the agreement shall continue in effect until January 1, 2018.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Boomerang MP Holdings and Stokes Industries are each 50% owners of BSMP and share equally in all profits and losses. Boomerang
MP Holdings will provide the initial $250,000 of capital required by BSMP to fund operations and marketing efforts over a two-year
period, of which approximately $115,000 has been awarded as of June 30, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The board of directors of BSMP is comprised of four members, with each party appointing two directors.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Sales</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have twelve contracts (including
the projects currently being implemented in Miami Beach, Florida, Stuart, Florida and the contract through Boomerang Systems Middle
East) to purchase our systems and are in active negotiations with other prospective customers as well as one contract for designing
our system into a prospective project. We have received deposits on all but two of our twelve current contracts, and we anticipate
that these contracts will all generate revenue, however, because we do not have a long track record of implementing these systems
commercially, we may not be able to accurately forecast our costs, profitability and receipt of revenue. Furthermore, because we
have entered into these contracts early in the planning period on projects that remain subject to substantial financial, permitting
and other uncertainties, there is no assurance that they will not be terminated. In such cases, there will be a substantial risk
that we will not realize all of the revenue that we otherwise would if the project was completed and that we may incur a loss on
such contracts. On future contracts, we intend to require a non-refundable payment at the time we enter into the contract with
progress payments generally related to our incurrence of expenses in connection with the contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In our experience, in order to sell our
systems, we typically need to be involved in the early planning stages of a project, resulting in a sales cycle can be from six
months to multiple years typically leading up to a contract being executed around the time the developer expects to gain planning
approvals. From the time that planning approvals are gained, it will typically take between six and twelve months for a developer
to prepare construction drawings and to receive permitting and construction financing so that construction of the project can commence.
Depending on the nature of the overall project which may or may not include much more than just a parking system, the site will
typically be ready for us to begin installation of our equipment after another six to twelve months from the start of construction.
This means that we will typically start installing our equipment one to two years from the time we secure a contract, but because
we will have to provide preconstruction services to help the developer obtain planning approvals and permitting, we will typically
generate a limited portion of the contract revenue within six months of signing a contract. In addition we will require progress
payments as we order materials and begin fabrication of equipment in advance of the installation, and we anticipate that we will
typically start generating revenue from fabrication activities at least six months prior to the start of the installation.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Manufacturing &amp; Installation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently lease two manufacturing facilities
in Logan, Utah. At these facilities we manufacture the steel components for the structures for our ALRS and rack and rail parking
systems, storage containers for our ALRS and steel trays for our parking systems as well as the mechanical and robotic sub-systems
for all of our systems. 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 and installed under our supervision. We also provide, for an additional
charge, construction services for our ALRS and Rack &amp; Rail parking systems, if requested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The construction period for the system at
its intended location will depend on upon the type, size and configuration of the system. In the case of our ALRS and Rack &amp;
Rail automated parking systems, we expect the implementation of the system onsite would take at least six months and because these
systems require construction of a steel rack system that must be installed under our supervision, and depending on the constraints
of the site, the nature of the rest of the project, and local work conditions, such an implementation could take substantially
longer. By contrast, we would install the equipment for our RoboticValet system into a concrete deck structure provided by the
client, which results in a significant simplification of our installation process. We anticipate that with this approach we could
install systems in as little as three months once the customer&rsquo;s structure is prepared. Our customers will be responsible
for obtaining all local and other governmental permits and approvals to construct the structure at their intended location.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Research and Development</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the years ended September 30, 2011 and
2010, the Company incurred $2,202,020 and $2,669,331 for research and development, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Inventory and Working Capital</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not currently maintain an inventory
of completed parking or self-storage systems available for sale and only maintain a limited partial inventory of certain of the
components or sub-assemblies for these systems. Even though we anticipate that each system we implement would be different in its
configuration, many of the components and sub-assemblies are standardized and could be stocked. Establishing a more extensive inventory
will depend upon our ability to establish sales volume in the future and our cash position at such time. At the present time, our
working capital together with cash from ongoing projects are sufficient to support our marketing activities, administrative requirements
and existing projects. However, to implement our full business plan, we may require additional funds. We anticipate receiving deposits
and partial completion payments sufficient to manufacture and install systems when ordered.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Competition</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We experience intense competition from others
in the manufacturing and marketing of our automated parking systems and storage systems. We have identified more than ten competitors
engaged in the manufacture and marketing of automated parking systems, and one engaged in manufacturing and marketing automated
self-storage systems. Some of our competitors are divisions of large multi-national enterprises and as such are better capitalized
than we are. They have also been in business longer than we have, have an installed project base, established relationships with
potential customers and others in the parking industry and have access to greater technical resources than those available to us.
While we do not believe that any of our competitors are capable of delivering a system substantially similar to our RoboticValet
at this time, we do believe that such a system could be developed by other manufacturers of automated parking systems, and based
on the positive reception we have received from the market for our RoboticValet product, we believe our competitors will attempt
to develop a similar system if they are not doing so already. In addition, manufacturers of automated materials handling warehouse
systems not in the automated parking business may seek to manufacture systems in competition with us. Other automated parking and
self-storage systems are available from both domestic and foreign manufacturers, and it can be anticipated that others will seek
to enter the market. We also compete with traditional parking and storage systems which are more economically viable in cases where
land and space are not as valuable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to seek to achieve a competitive
advantage over other parking and self-storage facilities as follows:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>By keeping our systems cost effective by making them simple to build, operate and maintain.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>By focusing 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 customers.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>In the domestic market, by maintaining our primary production facilities within the continental United States thereby enhancing
our ability to deliver and construct systems with greater speed and fewer logistical issues and lower shipping costs.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe our RoboticValet system represents
an advance in automated parking and will provide us with a significant competitive advantage in system performance and an ability
to provide developers with a system which is more easily approved by governmental entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Employees</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 13, 2012, we had 54 full-time
employees and 4 part-time employees. Of these, 23 full-time employees are in executive and general and administrative positions,
15 full-time employees and 3 part-time employees are engaged in design, 2 full-time employees are engaged in project management,
9 full-time employees and 1 part-time employee are engaged in manufacture and operations activities, and 4 full-time employees
and 1 full-time support employee are engaged in sales activities.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Prior Activities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Boomerang Systems, Inc., or Boomerang Utah,
was incorporated on December 6, 2006. From inception through the first quarter 2008, Boomerang Utah was a developmental stage company
doing research and development on its automated racking parking and storage systems.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Organization</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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., or Digital, from Dominion Resources Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 6, 2008, we completed the acquisition
of the business, assets and liabilities of Boomerang Utah by the merger of the Boomerang Utah into a wholly owned subsidiary of
ours. We issued as consideration for the acquisition 666,667 shares of our Common Stock. In connection with the closing of the
merger we (i) completed a private placement of 100,000 shares of our Common Stock pursuant to a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, resulting in net proceeds to us of approximately $1,700,000, (ii) effected
a one-for-fifteen reverse stock split of our outstanding shares and (iii) filed an amendment to our Certificate of Incorporation
with the State of Delaware effecting a change in our corporate name to Boomerang Systems, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 6, 2008, our company was recapitalized
to give effect to the acquisition of Boomerang Utah. Under generally accepted accounting principles, our acquisition of Boomerang
Utah is considered to be a capital transaction 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 our 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&rsquo; equity as if the
transactions occurred as of the beginning of the first period presented. Thus, the 666,667 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, our business has become the business of the Boomerang Utah.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to the acquisition of Boomerang
Utah, the shareholders of Boomerang Utah owned approximately 80.9% of our then outstanding shares. As the acquisition of Boomerang
Utah was a capital transaction, and not a business combination, there is no assigned goodwill or other intangible asset resulting
from the acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company was a developmental stage company
through the first quarter of fiscal 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Properties</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a five year lease, commencing
on December 1, 2011, for principal office space, consisting of approximately 7,350 square feet, located at 30 B Vreeland Avenue,
Florham Park, NJ. This is also the location of our sales and marketing activities. See Financial Statement Note 13 &ndash; Commitments
and Contingencies for terms of this lease, included elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Manufacturing is undertaken at 324 West
2500 North, Logan, Utah. A total of approximately 50,150 square feet for manufacturing, office and conference room space is subject
to lease agreements with SB&amp;G Properties and Stan Checketts Properties, both of which are related parties. See Note 12 to Notes
to Consolidated Financial Statements, included elsewhere in this prospectus. These leases expired in September 2011. Amendments
to both leases were entered into on October 1, 2011, extending the leases on a month-to-month basis. If we are unable to extend
these leases in the future, we will need to find another manufacturing facility, which may have an adverse impact on our operations.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Legal Proceedings</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we believe we are not a defendant
in any material pending legal proceedings, we may from time to time become involved in litigation relating to claims arising from
the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial
and managerial resources.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">MANAGEMENT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Executive Officers and Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our executive officers and directors and
their ages as of September 13, 2012 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 0.5pt solid"><B>Name</B></P></TD>
    <TD STYLE="width: 1%">
</TD>
    <TD STYLE="width: 67%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; border-bottom: Black 0.5pt solid"><B>Title</B></P></TD>
    <TD STYLE="width: 1%">
</TD>
    <TD STYLE="width: 4%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: Black 0.5pt solid"><B>Age</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Mark Patterson</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer and Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">51</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Christopher Mulvihill</TD>
    <TD>&nbsp;</TD>
    <TD>President and Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">42</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Scott Shepherd</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">44</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>David Koch</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Operating Officer</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">59</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Maureen Cowell</TD>
    <TD>&nbsp;</TD>
    <TD>Secretary and Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">46</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Stanley J. Checketts</TD>
    <TD>&nbsp;</TD>
    <TD>Director and Chief Executive Officer of Boomerang Sub, Inc.</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">71</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Joseph R. Bellantoni</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">50</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Steven C. Rockefeller, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">52</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Kevin M. Cassidy</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">56</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Anthony P. Miele, III</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">41</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each director serves for a term of one year
and until his or her successor is duly elected and qualified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of our directors bring to our Board
executive leadership experience derived from their service as senior executives and, in many cases, founders of industry or knowledge
specific consulting firms or operational businesses. Some offer extensive public company board experience. Each of our board members
has demonstrated strong business acumen and an ability to exercise sound judgment and has a reputation for integrity, honesty and
adherence to ethical standards. When considering whether directors and nominees have the experience, qualifications, attributes
and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of
the company&rsquo;s business and structure, the Corporate Governance and Nominating Committee and the Board of Directors focused
primarily on the information discussed in each of the Directors&rsquo; individual biographies and the specific individual qualifications,
experience and skills as described below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Mark Patterson.</I> Mr. Patterson is
the Chief Executive Officer and a Director of our Company and has served in such capacity since August 2010. From January of 2009
until joining the Company in June of 2010 as an Executive Vice President, Mr. Patterson was a real estate consultant. Until January
of 2009, Mr. Patterson was a Managing Director and the Head of Real Estate Global Principal Investments at Merrill Lynch, where
he oversaw the real estate principal investing activities of Merrill Lynch. Mr. Patterson joined Merrill Lynch in April 2005 as
the Global Head of Real Estate Investment Banking and in 2006 also became the Co-Head of Global Commercial Real Estate which encompassed
real estate investment banking, principal investing and mortgage debt. Prior to joining Merrill Lynch, Mr. Patterson spent 16 years
at Citigroup where he held numerous positions including the Global Head of Real Estate Investment Banking since 1996. Mr. Patterson
is a member of the Board of Directors of General Growth Properties, a company traded on the New York Stock Exchange under the symbol
GGP. During his career, Mr. Patterson has been involved in a wide variety of financing and investing activities that have spanned
virtually all types of real estate in most major global property markets. Mr. Patterson&rsquo;s day to day leadership of our company,
as Chief Executive Officer, provides him with intimate knowledge of our business, results of operations and financial condition.
Mr. Patterson, as a result of experience in the real estate investment banking industry, provides unique insights into our target
customers as well as our challenges and opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Christopher Mulvihill.</I> Mr. Mulvihill
has been employed as President and Manager of Sales and Marketing of our company since February 2008, and prior thereto served
in that capacity for Boomerang Utah from January 2007 to February 2008. Mr. Mulvihill was appointed as a Director of our Company
in May 2011. From August 2005 to January 2007, he was employed by The Active Network, Inc., a provider of online registration software
and event management software, as the Director of Business Development for Golf. From January 2002 to July 2005, Mr. Mulvihill
was the founder and President of Tee Time King, Inc., a provider of golf reservation, inventory management and point of sale software,
which grew to become the country&rsquo;s largest municipal golf course reservation company before being sold to The Active Network,
Inc. in August 2005. As President of our company, Mr. Mulvihill provides significant experience in sales, management and commercial
issues associated with technology based businesses which comprise an important aspect of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Scott Shepherd</I>. Mr. Shepherd has
served as our chief financial officer since January 18, 2012. Prior thereto, he served as our controller from February 2011 until
January 2012. Mr. Shepherd served as corporate controller for heavy equipment manufacturer and distributor, Komatsu Equipment Company,
from July 2009 to February 2011. From May 2008 to July 2009, he served as Chief Financial Officer for The Levitin Group, an online,
interactive computer based training company. He worked for Eskay Corporation (subsequently merged with Daifuku America Corporation),
a global automated material handling company from 1995 to 2008 and served as its Chief Financial Officer from 2000 until May 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>David Koch.</I> Mr. Koch is the Chief
Operating Officer of our Company and has served in such capacity since August 2011. He has been involved in the Automated Materials
Handling Industry for over 34 years. Mr. Koch has held positions of Sr. Mechanical Engineer, Principle Systems Engineer, Sr. Project
Manager, Sr. VP of Engineering, Sales, and Marketing as well as Co-Founder &amp; President of ESKAY Corporation (a joint venture
with Daifuku Materials Handling Co.) in North America from 1990 to 2005. From September 2005 to October 2010, Mr. Koch served as
the Director of Sales and Marketing for Power Automation System, a company specializing in automated storage and transportation
systems, and from October 2010 to July 2011, Director of Business Development for the North American Division of Dematic Corporation,
an automated material handling company. Mr. Koch has extensive experience in logistics and automated warehousing, distribution
and manufacturing across all industries and has experience working with companies in North America, Europe and Asia. Mr. Koch has
also served in many volunteer leadership positions for over 20 years in the Materials Handling Industry of America (MHIA) most
recently served on the Roundtable Advisory Committee to the board of governors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Maureen Cowell.</I> Ms. Cowell was the
Secretary of Digital Imaging Resources, Inc. since July 2007 and has remained so through the merger with Boomerang in February
2008. Ms. Cowell also became a Director of Boomerang on April 14, 2009. Ms. Cowell is also employed as Vice President of North
Jersey Management Services, Inc., a private company providing accounting and financial record-keeping services since December 1995.
Ms. Cowell has managed dozens of small private development stage corporations since 1992. Ms. Cowell has a comprehensive knowledge
of accounting, financial reporting, financial strategies, corporate governance and compliance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Stanley J. Checketts.</I> Mr. Checketts
has served as our Director and the Chief Executive Officer and director of our wholly-owned subsidiary, Boomerang Sub, Inc., positions
he has held since February, 2008. Prior thereto, he was the founder and Chief Executive Officer of S&amp;S Worldwide, Inc., or
S&amp;S, from 1994 to 2009. S&amp;S is a world leader 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. Checketts
has commenced developing, manufacturing and selling amusement rides through Stan Checketts Properties. Mr. Checketts had encountered
success in his past endeavors and brings insight to our challenges, along with strong leadership skills.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Joseph R. Bellantoni.</I> Mr. Bellantoni
has served as a director since February 2008. Mr. Bellantoni was Chief Financial Officer and a Director of Digital Imaging Resources,
Inc. from January 2007 until we acquired it and then served as our Chief Financial Officer from February 2008 until January 2012.
Mr. Bellantoni previously served as a director of Digital Imaging Resources, Inc. and as its Treasurer from April 1995 until November
2004. Mr. Bellantoni has also served as President of North Jersey Management Services, Inc, a private company providing accounting
and financial record-keeping services, since December 1995. North Jersey Management provides accounting and financial services
to Crystal Springs. Mr. Bellantoni possesses extensive knowledge of accounting, corporate governance, corporate compliance, financial
reporting and financial strategies, which has been an asset to our company in its development stage and ongoing operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Steven C. Rockefeller, Jr.</I> Mr. Rockefeller
has been a Director Since February 2010. He currently serves as Chairman and Chief Executive Officer of Rose Rock Capital where
he has worked since 2010. Rose Rock Capital is a family-owned Hong Kong holding company in the business of fund management and
development for real estate and infrastructure in China. In 2010, Mr. Rockefeller was honored to accept appointment from Executive
Vice Chairman Xiao Wunan as Co-Chairman of the Asia Pacific Exchange &amp; Cooperation Foundation (APECF), which, among other things,
focuses on development of Non Governmental Organizations public policy, religious respect and understanding, and philanthropy.
Since 2009 Mr. Rockefeller has served as a Visiting Professor at Nankai University. From 2000 to 2004, Mr. Rockefeller was a Board
Member of Grameen Foundation and Chairman of its Development Committee, and since 2009, Mr. Rockefeller has served as Special Advisor
on poverty alleviation to the Chairman of Rimbunan Hijau Group in Sibu, Malaysia. In recognition of his lifelong dedication to
poverty alleviation, Mr. Rockefeller received a Fulbright Award. Mr. Rockefeller currently serves on the board of directors of
two private companies, BioChemics (since 2005) and Tracer (since 2008). Since 2009, Mr. Rockefeller has served on the advisory
board of Sparta Commercial Services, Inc. From 1999 to 2004, Mr. Rockefeller served as a Managing Director of Deutsche Bank. Mr.
Rockefeller has a broad range of experience across many industries, including international real estate, and we believe he provides
valuable insight to our Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Kevin M. Cassidy.</I> Mr. Cassidy has
served as our Director since May 2010. Mr. Cassidy is currently the Managing Member of Logic International Consulting Group, LLC,
a consulting firm he formed in October, 1996, that specializes in the development of global trading businesses and the creation
of the requisite infrastructure, management and support paradigms of said platforms. From September 2002 to December 2008, Mr.
Cassidy was a Partner and Chief Operating Officer of Archeus Capital Management, LLC, which is a multi-strategy hedge fund. Mr.
Cassidy&rsquo;s knowledge in a range of business functions, including raising capital, leasing and corporate administration, provides
insight to our Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Anthony P. Miele, III.</I> Mr. Miele
has served as our Director since May 2010. Mr. Miele has been a Partner of White Honey, which offers a full spectrum of professional
photography of luxury fragrances for high profile clients, since August 2009. Mr. Miele was employed by Ricoh Business Solutions
as an Account Executive from August 2006 to July 2009. Mr. Miele was formerly employed by Tyco ADT Security Systems as a Small
Business Sales Representative from August 2005 to June 2006. Prior thereto, Mr. Miele was a sales trader on the New York Stock
Exchange from August 2003 to August 2005. Through his past work experiences, Mr. Miele has been involved with companies that were
in all stages of development which provides the Company with useful insight.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Independence of the Board of Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not a &ldquo;listed issuer&rdquo;
as such term is defined in Rule 10A-3 under the Exchange Act. We use the definition of independence of The NASDAQ Stock Market
LLC. The board has determined that Messrs. Rockefeller, Cassidy and Miele are independent. Each current member of the Audit Committee,
Compensation Committee and Nominating Committee is independent and meets the applicable rules and regulations regarding independence
for such committee, including those set forth in pertinent NASDAQ listing standards, and that each member is free of any relationship
that would interfere with his individual exercise of independent judgment.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Audit Committee and Audit Committee
Financial Expert</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors has appointed an
Audit Committee which consists of Messrs. Rockefeller and Cassidy. Each of such persons has been determined to be an &ldquo;independent
director&rdquo; under the listing standards of the NASDAQ Capital Market, which is the independence standard that was adopted by
our Board of Directors. Mr. Cassidy has been appointed as the Company&rsquo;s Audit Committee Financial Expert by our Board of
Directors. The Audit Committee operates under a written charter adopted by our Board of Directors. The Audit Committee assists
the Board of Directors by providing oversight of the accounting and financial reporting processes of the Company, appoints the
independent registered public accounting firm, reviews with the registered independent registered public accounting firm the scope
and results of the audit engagement, approves professional services provided by the independent registered public accounting firm,
reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees
and reviews the adequacy of internal accounting controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><I>Compensation Committee</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors has appointed a Compensation
Committee consisting of Messrs. Miele and Rockefeller. Each of such persons has been determined to be an &ldquo;independent director&rdquo;
under the listing standards of the NASDAQ Capital Market. Our Board of Directors has adopted a written Compensation Committee Charter
that sets forth the committee&rsquo;s responsibilities. The committee is responsible for determining all forms of compensation
for our executive officers, and establishing and maintaining executive compensation practices designed to enhance long-term stockholder
value.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Executive Compensation</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">2011 Summary Compensation Table</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the compensation
of our principal executive officer and our other most highly compensated executive officers (who we collectively refer to as &ldquo;named
executive officers&rdquo;) who received total compensation exceeding $100,000 for the year ended September 30, 2010 and who served
in such capacity at September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Name<BR>
    and&nbsp;Principal&nbsp;Position</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Bonus</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock<BR>
    Award</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option<BR>
    Award</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-Equity&nbsp;Incentive
    <BR>Plan&nbsp;Compensation</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Nonqualified
    <BR>Deferred <BR>Compensation</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">All&nbsp;Other</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(a)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(b)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (c&nbsp;)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (d)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (e)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)&nbsp;(1)<BR>
    (f)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (g)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (h)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (i)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">($)<BR> (j)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">Mark Patterson</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">200,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">4,202,406</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">4,402,406</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic"><FONT STYLE="font-size: 8pt">CEO(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">23,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">700,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">699,998</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">315,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(3)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,737,998</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Christopher Mulvihill</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">150,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,150,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">President and Manager of Sales and Marketing</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">150,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">150,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Stanley J. Checketts</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left"><FONT STYLE="font-size: 8pt">CEO, Boomerang Sub, Inc. (5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">100,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">5,049,077</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(5)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">5,149,077</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Joseph Bellantoni former</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">39,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">39,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic"><FONT STYLE="font-size: 8pt">CFO(6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">13,750</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">279,998</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(6)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-0-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">293,748</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>Represents the grant date fair value in accordance with ASC 718 (formerly FAS 123R). See Note 11 to Notes to Financial Statements
for the year ended September 30, 2011 for a description of valuation assumptions used in the calculation of grant date fair value.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>Mr. Patterson commenced service as our Executive Vice President in June 2010 and then became our Chief Executive Officer effective
August 21, 2010. As part of his employment agreement as Executive Vice President, Mr. Patterson received 140,000 shares of the
Company&rsquo;s common stock. The Company recognized $700,000 in expense for this issuance of common stock based on a value of
$0.25 per share on the date of issuance. In addition, Mr. Patterson received 140,000 warrants to purchase the Company&rsquo;s common
stock, exercisable at $5.00 per share. The Company recognized $699,998 in expense for this issuance of warrants. During fiscal
year 2011, a total of 970,000 warrants to purchase shares of the Company&rsquo;s common stock, exercisable at $5.00, vested per
Mr. Patterson&rsquo;s employment agreement. The Company recognized $4,202,406 in expense for these issuances.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>Pursuant to Mr. Patterson&rsquo;s employment agreement, we agreed to pay the Federal and state income taxes on behalf of Mr.
Patterson as a result of his receipt of 140,000 shares of our common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>In October 2010, Mr. Mulvihill received 200,000 options to purchase the Company&rsquo;s common stock exercisable at $5.00 per
share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>In February 2010, Mr. Checketts received 250,000 options to purchase the Company&rsquo;s common stock, exercisable at $2.00
per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD>In February 2010, Mr. Bellantoni received 20,000 options to purchase the Company&rsquo;s common stock, exercisable at $2.00
per share.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Narrative Disclosure to Summary
Compensation Table</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">Employment
Agreements</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2010, the Company entered into an
employment agreement with Mark Patterson to serve as our Executive Vice President. As part of the compensation, the Company issued
warrants to purchase 140,000 shares of common stock with an exercise price of $5.00 per share. The Company has agreed to pay all
Federal and State income taxes incurred by the Executive as a result of receiving the common shares and recognized $700,000 in
expense for the issuance of these common shares. In addition, the Company recognized $315,000 in expense for the related tax effect
of the above transaction. Mr. Patterson was also issued 140,000 warrants in June 2010 pursuant to his employment agreement. The
Company recognized $699,998 in expense for the issuance of these warrants. These warrants were cancelled during the fourth quarter
of 2010 and this agreement was subsequently amended and restated in October 2010 to include warrants to purchase a total 280,000
shares of common stock exercisable at $0.25 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 21, 2010, the Company entered
into an Employment Agreement with Mark Patterson, to serve as the Company&rsquo;s Chief Executive Officer, which was amended and
restated on October 1, 2010. The amended agreement provides for a base salary of $200,000 and provides for a grant of an aggregate
of 1,080,000 five-year warrants with an exercise price of $5.00 per share that vested and became exercisable as to 270,000 shares
on October 1, 2010, and vest and become exercisable as to 210,000 shares on each of February 1 and August 1, 2011 and February
1, 2012, and 180,000 shares on August 1, 2012. The amended agreement provides Mr. Patterson with a right of first refusal, pursuant
to which Mr. Patterson has the right, but not the obligation, to maintain his then pro rata share of the Company&rsquo;s issued
and outstanding shares and warrants by purchasing additional shares and warrants each time the Company offers shares and/or warrants
for sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Mulvihill is employed as our President
and Manager of Sales and Marketing pursuant to a five-year agreement, as amended, expiring on October 31, 2016. Pursuant to the
agreement, Mr. Mulvihill receives a commission of 3% of the gross sales of our products, with a non-refundable advance against
commissions of $60,000 per year. As additional compensation, the Company agreed to grant Mr. Mulvihill options to purchase 200,000
shares vesting immediately, exercisable at $5.00 per share for a term of 10 years. These options were granted in October 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company entered into an employment agreement
with David Koch on October 28, 2011, effective as of August 1, 2011. The agreement will continue in effect until terminated by
us or Mr. Koch. Mr. Koch is the Company&rsquo;s Chief Operating Officer. His compensation package includes an annual base salary
of $150,000, a stock bonus of 11,765 shares of common stock after being employed with the Company for six months which would vest
after one year of employment and a discretionary stock option grant upon a favorable performance review after his one year anniversary.
We will reimburse him up to $2,000 per month for travel.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-weight: normal">Non-Compete
Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Checketts is a party to a Non-Compete
Agreement with us dated December 10, 2007. The agreement was entered into in connection with our acquisition of Boomerang Utah.
He has agreed that for a period expiring three years after the date of termination of his employment he will not use his technical
knowledge concerning our business for the benefit of any other company or party engaged in our business in the United States. In
addition, he has agreed that during the period of this restriction he will keep secret and retain in confidence and will not use
in competition with us any of our confidential information.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Outstanding Equity Awards at September
30, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table reflects the equity
awards granted by us to the named executive officers that remain outstanding at September 30, 2011:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="15" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Equity&nbsp;Awards</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name&nbsp;and&nbsp;<BR> Grant&nbsp;Date</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of <BR>Securities <BR>Underlying <BR>Unexercised <BR>Option&nbsp;(#) <BR>Exercisable</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of <BR>Securities <BR>Underlying <BR>Unexercised <BR>Options&nbsp;($) <BR>Unexercisable</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option<BR> Exercise&nbsp;Price<BR> ($)</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Option&nbsp;Expiration<BR>
Date</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 20%; text-indent: -9pt; padding-left: 9pt">Mark Patterson<BR> October 1, 2010</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">690,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">390,000</TD><TD STYLE="width: 1%; text-align: left">(2)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 17%; text-align: right">5.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 19%">October 1, 2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">Mark Patterson<BR> November 12, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,000</TD><TD STYLE="text-align: left">(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>November 11, 2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">Christopher Mulvihill<BR> October 6, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>October 5, 2020</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">Stanley J. Checketts<BR> February 15, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>February 14, 2020</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">Joseph Bellantoni<BR> February 2, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>February 1, 2020</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD></TR></TABLE>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 30%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top"><TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>These options vested in full on the date of grant and are currently exercisable.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>These warrants vested as to 210,000 shares on February 1, 2012, and 180,000 shares on August 1, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Directors received no cash compensation
during the years ended September 30, 2011 and September 30, 2010, other than the compensation paid to our named executive officers
who are also Directors, which is reflected in the Summary Compensation Table above. Steven C. Rockefeller, Jr., one of our Independent
Directors, received an aggregate of 60,000 immediately exercisable five-year warrants, with an exercise price of $2.00 per share
as an inducement to and in connection with his Board service; 50,000 of these warrants were granted in February 2010 and 10,000
were granted in March 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Directors are reimbursed for their out-of-pocket
expenses incurred in connection with attending meetings.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Transactions with related persons</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">HSK Funding, Inc., Lake Isle Corp., and
Venturetek, LP, are beneficial holders of shares of our company and certain of their members and stockholders are also the members
of SB&amp;G Properties, LC., or SB&amp;G, which is the landlord under a lease with us. Gail Mulvihill, the individual who exercises
sole voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our President and is a principal
stockholder of our company. SB&amp;G entered into a lease with Boomerang Utah dated October 1, 2008, relating to premises located
at 324 West 2450 North, Building A, Logan, Utah. We assumed this lease in February 2008. The initial term of the lease was for
one year with an annual rent of $260,610 plus real property and school taxes. In addition, Boomerang is obligated to pay for all
utilities, repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used for Boomerang&rsquo;s
manufacturing activities. On March 15, 2010, Boomerang and SB&amp;G agreed to maintain these terms until September 30, 2011. On
October 1, 2011, Boomerang and SB&amp;G agreed to maintain these terms on a month to month basis with the monthly rent remaining
at $21,717, monthly paid rent remaining at $7,000 and monthly accrued rent remaining at $14,717. On July 8, 2010, we converted
$420,769 of deferred rent into 84,154 shares of our common stock and an equal number of five-year warrants, each to purchase one
share of our common stock, at an exercise price of $0.25 per share. Deferred rental payments totaling $267,480, $44,153 and $220,763
have been accrued as of September 30, 2009, 2010, and 2011, respectively, and $132,457 as of June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stan Checketts Properties, or SCP, a company
owned by the chief executive officer of Boomerang&rsquo;s wholly owned subsidiary, Boomerang Sub, Inc., entered into a lease with
Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah. We assumed this lease
in February 2008. The initial term of the lease was for one year at a fixed annual rent of $157,680 plus real property and school
taxes. Boomerang 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&rsquo;s manufacturing activities. On March 15, 2010, Boomerang and SCP
agreed to maintain these terms until September 30, 2011. On October 28, 2011, Boomerang and SCP amended the terms of the lease
to provide for a monthly payment of $14,940, effective as of October 1, 2011. On July 8, 2010, we converted $228,950 of deferred
rent into 45,790 shares of our common stock and an equal number of five-year warrants, each to purchase one share of our common
stock, at an exercise price of $5.00. Deferred rental payments totaling $178,808, $26,714 and $133,571 have been accrued as of
September 30, 2009, 2010 and 2011, respectively, and $0 as of June 30, 2012. We are also currently leasing an additional 2,400
square feet of office and conference room space from SCP for $1,800 a month.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">SB&amp;G is obligated on a twenty-year promissory
note due August 1, 2027 owing to a non-affiliated bank. The principal amount due was $841,891, $808,687 and $773,913 as of September
30, 2009, 2010 and 2011, respectively, and $745,578 as of June 30, 2012. The note bears interest at 3.807% per annum and is collateralized
by the real property that is the subject of the lease from SB&amp;G to Boomerang Utah. Boomerang and Messrs. Gene Mulvihill, Stan
Checketts, and Burton Koffman, are the joint and several guarantors of this promissory note. Gene Mulvihill is the husband of Gail
Mulvihill and the father of Christopher Mulvihill, our President.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Messrs. Gene 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&rsquo; pre-determined
fair market value of the equipment at the conclusion of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">J and A Financing, Inc., or J and A, also
affiliated with Messrs. Gene Mulvihill and Koffman, guaranteed two loans to Boomerang Utah from a non-affiliated bank, totaling
$500,728 as of June 30, 2010. The loans bore interest at 3.341% and 3.5% respectively, and were initially due on May 14, 2010 and
May 16, 2010, respectively. These loans were renewed during the quarter ended June 30, 2010 and were then due on May 14, 2011 and
May 16, 2011, respectively. In July 2010, J and A used collateral to purchase these loans from the non-affiliated bank. The outstanding
debt owed to J and A was converted to common stock on July 8, 2010. During fiscal year 2008, J and A loaned $1,000,000 to us. This
loan was scheduled to mature on March 31, 2011. The interest rate was 9% and the principal amount due at June 30, 2010 was $1,000,000.
This loan was converted to Common Stock on July 8, 2010. In total, $1,678,304 of debt owed to J and A was converted into 335,661
shares of common stock, and five-year warrants to purchase 335,661 shares of our common stock at an exercise price of $5.00 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the fiscal year ended September 30,
2009, 2010 and 2011, we used the services of Coordinate Services, Inc. for product development. The owner of this company is Gene
Mulvihill, Jr. who is the brother of Christopher Mulvihill, our President, and the son of Gail Mulvihill. The amount of this expense
during the fiscal year ended September 30, 2009, 2010 and 2011was $31,927, $128,959 and $158,879, respectively and $116,103 for
the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the fiscal year ended September 30,
2010 and 2011, the Company reimbursed North Jersey Management Services, Inc. for payroll related expenses for the services of Joseph
Bellantoni, the Company&rsquo;s former Chief Financial Officer, and Maureen Cowell, the Company&rsquo;s Corporate Secretary. Mr.
Bellantoni is also the President and Mrs. Cowell is the Vice President of North Jersey Management Services, Inc. Gail Mulvihill
owns 50% of North Jersey Management Services, Inc. The amount of this expense during the fiscal year ended September 30, 2010 and
2011 was $49,500 and $78,000, respectively, and $58,500 for the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 5, 2010, we issued a 6% Convertible
Promissory Note to James Mulvihill, brother of Christopher Mulvihill, our President and director, and the son of Gail Mulvihill,
in the amount of $100,000 due February 5, 2011. In March 2010, the principal and accrued interest on this note was converted into
50,384 shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In April 2010, Gail Mulvihill loaned $130,000
to us bearing interest of 6%. This loan was repaid in full during the year ended September 30, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2010, we entered into a twenty-year ground lease with
Route 94 Development Corporation, or Route 94, to lease a portion of an approximately fifteen acre parcel in the town of Hamburg,
located in Hardyston Township, New Jersey, on which we constructed a RoboticValet&trade; parking facility.&nbsp; The leased property
is adjacent to Grand Cascades Lodge, or Cascades, a hotel within the Crystal Springs Golf and Spa Resort, or the Resort. The parking
facility was constructed by Crystal Springs Builders, LLC, or Builders.&nbsp;&nbsp; It is intended that this facility will be used
by us primarily for demonstration and marketing purposes in the eastern portion of the United States.&nbsp; In consideration of
the benefits to us under the terms of the lease, we agree to provide to the lessor and its affiliates parking and storage space
within the facility at no cost to the lessor and its affiliates subject to our right to use the facility for demonstration purposes.&nbsp;
In addition, we are required to pay the operating costs, premiums on the insurance required under the terms of the lease and incremental
property taxes resulting from our construction of the facility.&nbsp; For a period of 60 months, commencing five years after execution
of the lease, the lessor has the option to purchase the facility from us and we have a right to cause the lessor to buy from us
the facility we construct.&nbsp; The price to be paid by the lessor upon exercise of its option to purchase the facility is 110%
of the greater of (i) the depreciated value of the facility, or (ii) the fair market value of the facility, and the price to be
paid by the lessor upon exercise of our right to cause the lessor to buy the facility is $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Resort owns and operates seven golf
courses, two hotels and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more than 40 additional
entities, including the above named entities. Gail Mulvihill owns 50% of each of Builders, Cascades and Route 94 and, indirectly,
through these and various other entities, Gail Mulvihill and her family own approximately 50% of the Resort. Except as set forth
above, no other officer, director or 5% or greater stockholder of the Company has any equity interest in Builders, Cascades or
Route 94.&nbsp;&nbsp;The Company incurred expenses of approximately $0, $1,075,000 and $375,000 for Builders during the fiscal
years ended 2009, 2010 and 2011, respectively, and $0 for the nine months ended June 30, 2012. The Company incurred expenses of
approximately $2,200, $14,000 and $80,000 for Cascades during the fiscal years ended 2009, 2010 and 2011, respectively, and $47,000
for the nine months ended June 30, 2012. No expenses were incurred for Route 94 during the fiscal years ended 2009, 2010 and 2011,
or the nine months ended June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 14, 2010, we entered into a 6% convertible
line of credit for up to $1,300,000 with Sail Energy, a company owned by Gail Mulvihill. In May 2011, it was agreed between the
Company and Sail Energy that there would be no additional borrowings under this line of credit. The amount outstanding on this
line of credit as of September 30, 2010 and 2011 was $273,000 and $300,142, respectively. The note, together with accrued but unpaid
interest, was convertible into shares of our common stock. The five-year warrants to purchase our common stock have an exercise
price of $5.00 at a conversion rate of $5.00 for a unit consisting of one share of our common stock and one warrant. This debt
was refinanced as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2010, Venturetek, LP, a principal
stockholder of us, entered into a 6% convertible promissory note with us for $273,000. The amount outstanding on this note, including
accrued interest, as of September 30, 2010 and 2011 was 273,000 and 292,461. The note, together with accrued but unpaid interest,
was convertible into shares of our common stock. The five-year warrants to purchase our common stock have an exercise price of
$5.00 at a conversion rate of $5.00 for a unit consisting of one share of our common stock and one warrant. This debt was refinanced
as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 29, 2010, we entered into a
financing commitment letter, which we refer to as the Commitment Letter, pursuant to which it obtained a commitment for an aggregate
of up to $3,250,000 of financing to be provided, upon demand by us, by nine accredited investors, including an aggregate of up
to $1,750,000 by four related parties. If we draw down under the Commitment Letter, we will issue notes to the lenders. Each note
would be our senior unsecured obligation and would bear interest from the date of the borrowing thereunder on the outstanding principal
balance at a rate of 3% per annum. The Commitment Letter expires on the earlier to occur of (a) January 1, 2012, and (b) the consummation
of a private or public offering of our common stock yielding gross proceeds to us in an amount not less than $5,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the terms of the Commitment Letter,
each lender received one five-year warrant for every dollar such lender committed, with an exercise price of $0.30 per share. In
addition, if we borrow under the letter, each lender will receive additional warrants at a rate of three warrants for each dollar
drawn down from that lender&rsquo;s commitment, with the amount of the draw down attributable to each lender&rsquo;s commitment
to be determined on a pro rata basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The related parties who committed to provide
financing under the letter are Mark Patterson, our chief executive officer (up to $500,000); Lake Isle Corp., a greater than 10%
holder of our common stock, over which Gail Mulvihill, the mother of our president, Christopher Mulvihill, exercises sole voting
and investment control (up to $750,000); HSK Funding, over which Burton I. Koffman, a greater than 10% holder of our common stock,
exercises sole voting and investment control (up to $250,000); and James Mulvihill, the son of Gail Mulvihill and brother of Christopher
Mulvihill (up to $250,000).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In February and March 2011, we drew down
a total of $2,166,664 on our line of credit of $3,250,000. In connection with the draw down, we issued notes in an aggregate amount
of $1,166,666 to four of the related parties listed in the paragraph above. In addition, in connection with the draw down, five-year
warrants were issued to these related parties to purchase a total of 175,000 shares of common stock at an exercise price of $6.00
per share. In May 2011, we drew down the remaining $1,083,336 on the aforementioned line of credit of $3,250,000. In connection
with the draw down, we issued notes in an aggregate amount of $583,334 to four related parties. In addition, in connection with
the draw down, five-year warrants were issued to these related parties to purchase a total of 87,500 shares of common stock at
an exercise price of $6.00 per share. This debt was refinanced as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September and October 2011, we borrowed
funds from Atlantic and Madison of NJ Corp, a company owned by Gail Mulvihill, in the aggregate principal amount of $1,451,000,
with the understanding that upon finalization of the documents related to a private placement offering by us, these loans will
be considered an investment in such private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In November 2011, we borrowed funds from
Mark Patterson, our Chief Executive Officer, in the amount of $100,000, with the understanding that upon finalization of the documents
related to a private placement offering by us, this loan will be considered an investment in such private placement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In November and December 2011, we issued
to subscribers 6% convertible promissory notes in the aggregate principal amount of approximately $11.6 million and five-year warrants
to purchase common stock in a private placement. In connection with the offering, we received cash proceeds of approximately $5.0
million and refinanced approximately $6.6 million of then existing short-term indebtedness. For each $100,000 invested, a subscriber
was issued a $100,000 principal amount note and warrants to purchase 23,530 shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the 2011 offering, the
following related parties refinanced indebtedness in the amounts and for the notes and warrants listed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Indebtedness <BR>Converted</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Notes&nbsp;issued&nbsp;in <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;issued&nbsp;in <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 61%; text-align: left">HSK Funding Inc.<SUP>(1)</SUP></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">254,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">254,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">59,765</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Lake Isle Corporation<SUP>(2)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,761,917</TD><TD STYLE="text-align: left">(10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,761,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">414,570</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Christopher Mulvihill<SUP>(3)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,451,000</TD><TD STYLE="text-align: left">(11)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,451,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">341,412</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">James Mulvihill TTEE Sunset Group Inc. PSP<SUP>(4)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">253,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">253,917</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,745</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">MRP Holdings LLC and Mark R Patterson Revocable Trust<SUP>(5)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">608,014</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">608,014</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,063</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sail Energy LLC<SUP>(6)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">300,142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">300,142</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,622</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stan Checketts Properties, L.C.<SUP>(7)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">133,571</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">133,571</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,429</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>SB&amp;G Properties LLC<SUP>(8)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">220,763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">220,763</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51,945</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Venturetek L.P.<SUP>(9)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">292,461</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">292,461</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,815</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD></TR></TABLE>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top"><TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>HSK Funding Inc. is a principal stockholder and a member of SB&amp;G Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>Gail Mulvihill, the individual who exercises sole voting and investment control over Lake Isle Corporation, is the mother of
Christopher Mulvihill, the Company&rsquo;s President, and is a principal stockholder. Lake Isle Corporation is a member of SB&amp;G
Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>Christopher Mulvihill is the Company&rsquo;s President and director.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>James Mulvihill is the brother of Christopher Mulvihill and son of Gail Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>MRP Holdings LLC, and Mark R Patterson Revocable Trust are owned by Mark Patterson, the Company&rsquo;s Chief Executive Officer
and director.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD>Sail Energy LLC is owned by Gail Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD>Stan Checketts Properties, L.C. is owned by Stan Checketts, the Chief Executive Officer of the Company&rsquo;s wholly owned
subsidiary and director of the Company, and is a principal stockholder. Stan Checketts Properties is a member of SB&amp;G Properties
LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD>SB&amp;G Properties LLC is owned by HSK Funding Inc., Stan Checketts Properties, Lake Isle Corporation and Venturetek L.P.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD>Venturetek L.P. is a principal stockholder and a member of SB&amp;G Properties LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD>Included in this balance is $1,000,000 of indebtedness resulting from a bank line of credit that Lake Isle Corp. caused to
be paid in full. Accordingly, the Company became indebted to Lake Isle Corp for $1,000,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD>On October 28, 2011, Atlantic and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt
owed to it by the Company to Christopher Mulvihill.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following related parties participated
in the 2012 offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Notes issued in <BR>Offering</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants issued in <BR>Offering</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">MRP Holdings LLC (1)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">150,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">30,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sail Energy, LLC (2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">510,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Heather Mulvihill (3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">IA 545 Madison Assoc.(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Burton I. Koffman (4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">David Kent and Christine W. Koch (5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company&rsquo;s Chief Executive Officer and a director.</TD></TR></TABLE>

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<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company&rsquo;s
President and director.</TD></TR></TABLE>

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<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.</TD></TR></TABLE>

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<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.</TD></TR></TABLE>

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<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>David Kent Koch is the Company&rsquo;s Chief Operating Officer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 16, 2012, we entered into a line
of credit for an amount up to $400,000 with Highlands State Bank which is guaranteed by through amounts in a checking account with
Princeton London Investment Fund Corp. funded by Mark R. Patterson, a principal stockholder and the Company&rsquo;s Chief Executive
Officer and director, Gene Mulvihill and Christopher Mulvihill each of whom funded $100,000 as of May 16, 2012. This line of credit
was repaid with proceeds from the 2012 offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the quarter ended June 30, 2012,
the Resort paid $50,000 to the Company for the purchase of mechanical parking equipment that will be provided by Boomerang-Stokes
Mechanical Parking LLC. At June 30, 2012, the Company recorded this amount as a payable and has subsequently paid the amount in
full to Boomerang-Stokes Mechanical Parking LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our management believes that the terms of
the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under
the circumstances as when the transactions were entered into.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Review, approval or ratification
of transactions with related persons</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our management believes that the terms of
the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under
the circumstances as when the transactions were entered into.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth, as of September
13, 2012, information with respect to each person (including any &ldquo;group&rdquo; 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 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 September 13, 2012, we had 7,399,086 shares of Common Stock outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Some of the beneficial owners listed below
are also selling securityholders. See &ldquo;Selling Securityholders.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, the address
for each beneficial holder of 5% or more of our common stock is c/o Boomerang Systems, Inc., 30B Vreeland Road, Florham Park, New
Jersey 07932.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Name&nbsp;of&nbsp;Beneficial&nbsp;Owner</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number&nbsp;of&nbsp;Shares</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Beneficially&nbsp;Owned&nbsp;<SUP>(1)&nbsp;</SUP></B></P></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Percentage&nbsp;of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common&nbsp;Stock</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Outstanding&nbsp;<SUP>(1)</SUP></B></P></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; text-indent: -9pt; padding-left: 9pt">Mark R. Patterson</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">2,251,862 (2)</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">24.1</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Christopher Mulvihill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,241,464 (3)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Stanley J. Checketts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,013,305 (4)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12.8</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Scott Shepherd</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">David Koch</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41,807 (5)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Joseph R. Bellantoni</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,667 (6)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Maureen Cowell</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,534 (7)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Anthony P. Miele, III</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93,527 (8)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.3</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Steven Rockefeller, Jr.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000 (9)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Kevin Cassidy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">All Directors and Executive Officers as a Group (10 persons)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,767,166</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Other 5% Stockholders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Gail Mulvihill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,383,739 (10)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Lake Isle Corp.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,135,754 (11)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Burton I. Koffman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,926,698 (12)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23.1</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Venturetek, LP</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,714,791 (13)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">HSK Funding, Inc.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,602,015 (14)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Stan Checketts Properties, LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">763,305 (15)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.9</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Albert Behler</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">763,821 (16)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.6</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">J and A Financing Inc</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">671,322 (17)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.7</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Sail Energy LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;671,322 (18)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.1</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">MRP Holdings LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;403,927 (19)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.2</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Alexandria Equities, LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,557 (20)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.1</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">* Less than 1%</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>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 September 13, 2012 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.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(2)</TD><TD>Includes 190,000 shares held by Mr. Patterson, 1,410,000 shares issuable upon exercise of warrants held by Mr. Patterson, 4,861
shares held by MRP Holdings LLC, over which Mr. Patterson exercises sole voting and investment control, referred to as MRP, 149,533
shares issuable upon the conversion of outstanding convertible notes held by MRP, 249,533 shares issuable upon the exercise of
warrants held by MRP, 100,875 shares held by Mark R. Patterson Revocable Trust, over which Mr. Patterson exercises sole voting
and investment control, referred to as Patterson Trust, 23,530 shares issuable upon the conversion of outstanding convertible notes
held by Patterson Trust and 123,530 shares issuable upon the exercise of warrants held by Patterson Trust. All warrants and notes
are exercisable or convertible within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(3)</TD><TD>Includes 338,640 shares owned directly by Mr. Mulvihill and 20,000 shares owned by Great Delaware &amp; American, Inc. over
which Mr. Mulvihill exercises sole voting and investment control. Also includes 341,412 shares issuable upon the conversion of
outstanding convertible notes held by Mr. Mulvihill, 200,000 shares issuable on exercise of options and 341,412 shares issuable
on exercise of warrants, all of which are exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(4)</TD><TD>Includes 250,000 shares issuable upon exercise of options issued to Mr. Checketts, 380,382 shares held by Stan Checketts Properties,
LLC, over which Mr. Checketts exercises sole voting and investment control, referred to as SCP, 31,429 shares issuable upon the
conversion of outstanding convertible notes held by SCP, 77,219 shares issuable upon the exercise of warrants held by SCP, 86,231
shares held by SB&amp;G Properties L.L.C., referred to as SB&amp;G, which is owned, in part, by SCP, 51,945 shares issuable upon
the conversion of outstanding convertible notes held by SB&amp;G, and 136,099 shares issuable upon the exercise of warrants held
by SB&amp;G. All of the options, notes and warrants are exercisable or convertible within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(5)</TD><TD>Includes 11,765 shares held by Mr. Koch directly and 42 shares held directly by Mr. Koch and his wife, 15,000 shares issuable
upon the conversion of outstanding convertible notes held by Mr. Koch and his wife and 15,000 shares issuable upon exercise of
outstanding warrants held by Mr. Koch and his wife.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(6)</TD><TD>Includes 167 shares held by Mr. Bellantoni&rsquo;s father as to which Mr. Bellantoni disclaims beneficial ownership. Also includes
37,500 shares issuable on exercise of options exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(7)</TD><TD>Includes 27,534 shares issuable on exercise of options exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(8)</TD><TD>Includes 73,750 shares owned directly by Mr. Miele and Heather Miele and 19,777 shares issuable upon exercise of warrants received
from the August 2008 Post-Maturity warrants held by Mr. Miele and Heather Miele exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(9)</TD><TD>This includes 60,000 shares issuable on exercise of warrants exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(10)</TD><TD>Includes 760,034 shares held by Mrs. Mulvihill, 15,400 shares issuable upon the exercise of warrants held by Mrs. Mulvihill,
127,307 shares held by Sail Energy LLC, over which Mrs. Mulvihill exercises sole voting and investment control, referred to as
Sail Energy, 172,622 shares issuable upon the conversion of outstanding convertible notes held by Sail Energy, 172,622 shares issuable
upon the exercise of warrants held by Sail Energy, 211,017 shares held by Lake Isle Corp., over which Mrs. Mulvihill exercises
sole voting and investment control, referred to as Lake Isle, 564,570 shares issuable upon the exercise of warrants held by Lake
Isle, 414,570 shares issuable upon the conversion of outstanding convertible notes held by Lake Isle, 86,231 shares held by SB&amp;G,
which is owned, in part, by Lake Isle, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&amp;G,
136,099 shares issuable upon the exercise of warrants held by SB&amp;G, 335,661 shares held by J and A Financing Inc., referred
to as J&amp;A, which is owned, in part, by Lake Isle, and 335,661 shares issuable upon the exercise of warrants held by J&amp;A,
all of which are exercisable or convertible within 60 days of September 13, 2012. The address for J&amp;A, Sail Energy and Lake
Isle is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.75pt; text-indent: -36.75pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(11)</TD><TD>Includes 211,017 shares held by Lake Isle, over which Gail Mulvihill exercises sole voting and investment control, 564,570
shares issuable upon the exercise of warrants held by Lake Isle, 414,570 shares issuable upon the conversion of outstanding convertible
notes held by Lake Isle, 86,231 shares held by SB&amp;G, which is owned, in part, by Lake Isle, 51,945 shares issuable upon the
conversion of outstanding convertible notes held by SB&amp;G, 136,099 shares issuable upon the exercise of warrants held by SB&amp;G,
335,661 shares held by J&amp;A, which is owned, in part, by Lake Isle, and 335,661 shares issuable upon the exercise of warrants
held by J&amp;A, all of which are exercisable or convertible within 60 days of September 13, 2012. The address for Lake Isle is
3621 Route 94, 2nd Floor, Hamburg, NJ 07419.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(12)</TD><TD>This information is based in part on a Schedule 13G filed with the Securities and Exchange Commission on November 13, 2009.
Includes 5,803 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible notes
held by Mr. Koffman and 12,500 shares issuable upon exercise of warrants held by Mr. Koffman, 4,592 shares owned by Public Loan
Company, 4,176 shares owned by The K-6 Family Limited Partnership, 20,000 shares owned by 300 Plaza Drive Associates, 25,000 shares
owned by New Valu, Inc., 137,612 shares owned by IA 545 Madison Assoc., 55,000 shares issuable upon exercise of warrants held by
IA 545 Madison Assoc. and 50,000 shares issuable upon conversion of outstanding convertible notes held by IA 545 Madison Assoc.,
376,359 shares owned by HSK Funding Inc., referred to as HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765
shares issuable upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&amp;G, which is owned,
in part, by HSK, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&amp;G, 136,099 shares issuable
upon the exercise of warrants held by SB&amp;G, 335,661 shares held by J&amp;A, which is owned, in part, by HSK, and 335,661 shares
issuable upon the exercise of warrants held by J&amp;A, exercisable within 60 days of September 13, 2012, over which Mr. Koffman
exercises voting and investment control of all securities held by these entities. The address for Mr. Koffman is 300 Plaza Drive,
Vestal, NY 13850.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(13)</TD><TD>David Selengut is the natural person who exercises voting and investment control over the shares held by Venturetek, LP. Includes
512,214 shares owned directly by Venturetek, LP., 188,165 shares issuable upon exercise of warrants held by Venturetek, and 68,815
shares issuable upon the conversion of outstanding convertible notes held by Venturetek, 86,231 shares held by SB&amp;G, which
is owned, in part, by Venturetek, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&amp;G,
136,099 shares issuable upon the exercise of warrants held by SB&amp;G, 335,661 shares held by J&amp;A, which is owned, in part,
by Venturetek, and 335,661 shares issuable upon the exercise of warrants held by J&amp;A, all of which are exercisable or convertible
within 60 days of September 13, 2012. The address for Venturetek is c/o Nesher LLC, P.O. Box 339, Lawrence, NY 11559.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(14)</TD><TD>Includes 376,359 shares held by HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765 shares issuable
upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&amp;G, which is owned, in part, by HSK,
51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&amp;G, 136,099 shares issuable upon the
exercise of warrants held by SB&amp;G, 335,661 shares held by J&amp;A, which is owned, in part, by HSK, and 335,661 shares issuable
upon the exercise of warrants held by J&amp;A, all of which are exercisable or convertible within 60 days of September 13, 2012.
The address for HSK is 300 Plaza Drive, Vestal, NY 13850.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(15)</TD><TD>Includes 380,382 shares held by SCP, over which Mr. Checketts exercises sole voting and investment control, 31,429 shares issuable
upon the conversion of outstanding convertible notes held by SCP, 77,219 shares issuable upon the exercise of warrants held by
SCP, 86,231 shares held by SB&amp;G, which is owned, in part, by SCP, 51,945 shares issuable upon the conversion of outstanding
convertible notes held by SB&amp;G, and 136,099 shares issuable upon the exercise of warrants held by SB&amp;G. All of the warrants
and notes are exercisable or convertible within 60 days of September 13, 2012. The address for SCP is P.O. Box 55, Providence,
UT 84332.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(16)</TD><TD>Includes 214,775 shares owned directly by Mr. Behler, and 429,523 shares issuable upon exercise of warrants, and 119,523 shares
issuable upon the conversion of outstanding convertible notes exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(17)</TD><TD>Includes 335,661 shares held directly by J&amp;A and 335,661 shares issuable upon exercise of warrants exercisable within 60
days of September 13, 2012. The address for J&amp;A is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(18)</TD><TD>Includes 127,307 shares held directly by Sail Energy, 172,622 shares issuable upon exercise of warrants and 172,622 issuable
upon conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012. The address for Sail Energy
is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(19)</TD><TD>Includes 4,861 shares held directly by MRP, 249,533 shares issuable upon exercise of warrants and 149,533 shares issuable upon
conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 36.75pt">(20)</TD><TD>Includes 557 shares held directly by Alexandria Equities, LLC, 200,000 shares issuable upon exercise of warrants and 200,000
shares issuable upon conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.75pt; text-indent: -36.75pt">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">SELLING SECURITYHOLDERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The shares of common stock being offered
by the selling securityholders are those issuable to the selling securityholders upon conversion of the notes and exercise of the
warrants. For additional information regarding the issuance of the notes and the warrants, see &ldquo;Private Placement of Notes
and Warrants&rdquo; above. We are registering the shares of common stock in order to permit the selling securityholders to offer
the shares for resale from time to time. Other than as described below, except for the ownership of the notes and the warrants
issued pursuant to the Subscription Agreement, the selling securityholders have not had any material relationship with us within
the past three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below lists the selling securityholders
and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling securityholders.
The third column lists the number of shares of common stock beneficially owned by the selling securityholders, based on their respective
ownership of shares of common stock, notes and warrants, as of September 13, 2012, assuming conversion of the notes and exercise
of the warrants held by each such selling securityholder on that date but taking account of any limitations on conversion and exercise
set forth therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The fourth column lists the shares of common
stock being offered by this prospectus by the selling securityholders and does not take into account any limitations on (i) conversion
of the notes set forth therein or (ii) exercise of the warrants set forth therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In accordance with the terms of a registration
rights agreement with the holders of the notes and the warrants, this prospectus generally covers the resale of 120% of the sum
of (i) the maximum number of shares of common stock issuable upon conversion of the notes and (ii) the maximum number of shares
of common stock issuable upon exercise of the warrants, in each case, determined as if the outstanding notes and warrants were
converted or exercised (as the case may be) in full (without regard to any limitations on conversion or exercise contained therein)
as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. Because the
conversion price of the notes and the exercise price of the warrants may be adjusted or stock issued upon certain events, the number
of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2012, we issued an aggregate amount
of 2,795 shares to the holders of the notes as interest payments on such notes, which amounts are included in the fourth and fifth
columns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The fifth column assumes the sale of all
of the shares offered by the selling securityholders pursuant to this prospectus.</P>

<P STYLE="font: normal italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: normal italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Under
the terms of the notes and the warrants, a selling securityholder may not convert the notes or exercise the warrants to the extent
(but only to the extent) such selling securityholder or any of its affiliates would beneficially own a number of shares of our
common stock which would exceed 4.9%. The number of shares in the second column reflects these limitations. The selling securityholders
may sell all, some or none of their shares in this offering. See &ldquo;Plan of Distribution.&rdquo;</FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name&nbsp;of&nbsp;Selling <BR>Securityholder</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Principal&nbsp;Amount <BR>of&nbsp;Notes&nbsp;Offered <BR>pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;Offered <BR>Pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp;of <BR>Common&nbsp;Stock <BR>Beneficially <BR>Owned&nbsp;Prior&nbsp;to <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maximum <BR>Number&nbsp;of&nbsp;Shares <BR>of&nbsp;Common&nbsp;Stock <BR>Being&nbsp;Offered <BR>Pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp;of&nbsp;Common <BR>Stock&nbsp;Beneficially <BR>Owned&nbsp;After <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: 0in">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>Number</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>%</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>Number</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>%</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 23%; text-align: left; text-indent: 0in">Alexandria Equities, LLC(1)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">1,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">400,557</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">5.1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">480,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Bancroft Investments(2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,140</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">120,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Michael and Sarah Berman(3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Bri Ram Cor, LLC(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Celestial Holdings, LLC(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Churchill&nbsp; Drive Investors, LLC(6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">351,940</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">311,884</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">Michael Dana(7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,028</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Martha T. Douds Revocable Trust DTD 09/25/1989(8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Eagle Hawk Partners, LP(9)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">159,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">119,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.6</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Paul and Elizabeth Faherty(10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,023</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,200</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">James Gelly(11)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">108,084</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Gilford Securities Incorporated(12)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">163,976</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,760</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">109,176</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">William J. Goodrum Revocable Trust(13)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">John W. Gosnell(14)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Charles A. Gravely(15)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">80,112</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Steven Harrigan(16)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">IA 545 Madison Assoc.(17)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">242,612</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">120,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">142,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Robert Insolia(18)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,028</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">JMW Fund, LLC(19)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">James D. Klein(20)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Burton I. Koffman(21)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,926,698</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22.6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,806,586</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Milton Koffman(22)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">325,082</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">204,970</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.7</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">David Kent and Christine W. Koch(23)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41,087</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,765</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">McClane Cover(24)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Gilbert G. Menna(25)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,084</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Mitchell Family Investments II, LLC(26)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">MRP Holdings LLC(27)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">150,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">403,927</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">72,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">343,843</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Heather Mulvihill(28)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">425,718</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">385,662</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">Albert Nocciolino(29)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,883</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,883</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 0in">Katherine Obrien(30)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Wendy S. O&rsquo;Keeffe(31)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,028</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Robert O&rsquo;Mara IRA(32)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,862</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,867</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 75; Value: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name&nbsp;of&nbsp;Selling <BR>Securityholder</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Principal&nbsp;Amount <BR>of&nbsp;Notes&nbsp;Offered <BR>pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants&nbsp;Offered <BR>Pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp;of <BR>Common&nbsp;Stock <BR>Beneficially <BR>Owned&nbsp;Prior&nbsp;to <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maximum <BR>Number&nbsp;of&nbsp;Shares <BR>of&nbsp;Common&nbsp;Stock <BR>Being&nbsp;Offered <BR>Pursuant&nbsp;to&nbsp;this <BR>Prospectus</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp;of&nbsp;Common <BR>Stock&nbsp;Beneficially <BR>Owned&nbsp;After <BR>Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;<B>Number</B></TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>%</B></TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;<B>Number</B></TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>%</B></TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 23%; text-align: left; text-indent: 0in">Pacific Asset Partners(33)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">600,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">120,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">240,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">3.1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">288,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Stephen L. and Catherine J. Parker(34)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">Dennis Pigat(35)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,028</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Louis C. Rose(36)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">125,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">194,068</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">Philip Rubinfeld(37)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">125,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">145,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.3</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Sail Energy LLC(38)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">510,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">472,551</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">244,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">268,267</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">San Gabriel Fund, LLC(39)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Ettore A. Santucci(40)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,056</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">VN Advisors, LLC(41)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;*</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Vulcan Properties, Inc.(42)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,029</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63,001</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0in">Shelton Zuckerman(43)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">80,112</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">*Denotes less than 1%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Includes 557 shares held directly, 200,000 shares issuable upon conversion of notes and 200,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Joel Marcus, as chief executive officer of the managing member, Alexandria
Real Estate Equities, Inc., has sole voting and dispositive power over the securities held by Alexandria Equities, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Includes 140 shares held directly, 50,000 shares issuable upon conversion of notes and 50,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Paul M. Bancroft, as managing partner, has voting and dispositive
power over the securities held by Bancroft Investments.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Brian Bates, as managing partner, has sole voting and dispositive
power over the securities held by BriRamCor, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that Karen B. Cohen, as the sole member and sole manager, has sole voting and dispositive power
over the securities held by Vulcan Properties, Inc.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Includes 72,444 shares held directly, 79,748 shares issuable upon conversion of notes and 199,748 shares issuable upon exercise
of warrants. The selling securityholder also informed us that John Blumberg, as sole member, has sole voting and dispositive power
over the securities held by Churchill Drive Investors LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>Includes 20,028 shares held directly, 10,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>Includes 15,000 shares issuable upon conversion of notes and 15,000 shares issuable upon exercise of warrants. The selling
securityholder also informed us that Martha T. Douds, as trustee, has sole voting and dispositive power over the securities held
by the Martha T. Douds Revocable Trust dated 9/25/1989.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Includes 2,350 shares held directly, 78,824 shares issuable upon conversion of the note and 78,824 shares issuable upon exercise
of warrants. The selling securityholder has informed us that David P. O&rsquo;Connor, as managing partner, has sole voting and
dispositive power over the shares held by Eagle Hawk Partners, LP.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(10)</TD><TD>Includes 23 shares held directly, 8,000 shares issuable upon conversion of notes and 8,000 shares issuable upon exercise of
warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(11)</TD><TD>Includes 1,024 shares held directly, 53,530 shares issuable upon conversion of notes and 53,530 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(12)</TD><TD>All shares are issuable upon exercise of warrants issued to Gilford Securities Incorporated as compensation for services as
placement agent. The selling securityholder has informed us that Robert A. Maley, as President and Chief Executive Officer of Gilford
Securities Incorporated, has sole voting and dispositive power over the securities held by Gilford Securities Incorporated. Gilford
Securities Incorporated is a registered broker-dealer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(13)</TD><TD>Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that William J. Goodrum, as trustee, has sole voting and dispositive power over the securities held
by the William J. Goodrum Revocable Trust.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(14)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(15)</TD><TD>Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(16)</TD><TD>Includes 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(17)</TD><TD>Includes 137,612 shares held directly, 50,000 shares issuable upon conversion of notes and 55,000 issuable upon exercise of
warrants. The selling securityholder has informed us that Burton I. Koffman and Milton Koffman are partners of IA 545 Madison Assoc.
and each has voting and dispositive power over the securities held by IA 545 Madison Assoc.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(18)</TD><TD>Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(19)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.<FONT STYLE="font-size: 10pt; color: windowtext"> </FONT>The selling securityholder has informed us that Justin Yorke,
as managing member, has sole voting and dispositive power over the securities held by JMW Fund, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(20)</TD><TD>Includes 30,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that James D. Klein, has sole voting and dispositive power over the securities held by the James
D. Klein IRA.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(21)</TD><TD>Includes 5,803 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible
notes held by Mr. Koffman and 12,500 shares issuable upon exercise of warrants held by Mr. Koffman, 4,592 shares owned by Public
Loan Company, 4,176 shares owned by The K-6 Family Limited Partnership, 20,000 shares owned by 300 Plaza Drive Associates, 25,000
shares owned by New Valu, Inc., 137,612 shares owned by IA 545 Madison Assoc., 50,000 shares issuable upon conversion of outstanding
convertible notes held by IA 545 Madison Assoc., 55,000 shares issuable upon exercise of warrants held by IA 545 Madison Assoc.
376,359 shares owned by HSK Funding Inc., referred to as HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765
shares issuable upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&amp;G, which is owned,
in part, by HSK, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&amp;G, 136,099 shares issuable
upon the exercise of warrants held by SB&amp;G, 335,661 shares held by J&amp;A, which is owned, in part, by HSK, and 335,661 shares
issuable upon the exercise of warrants held by J&amp;A, Mr. Koffman exercises voting and dispositive power over all securities
held by these entities.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 77; Value: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->70<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(22)</TD><TD>Includes 57,470 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible
notes held by Mr. Koffman, 15,000 shares issuable upon the exercise of warrants held by Mr. Koffman, 137,612 shares owned by IA
545 Madison Assoc., 50,000 shares issuable upon conversion of outstanding convertible notes held by IA 545 Madison Assoc., and
55,000 shares issuable upon the exercise of warrants held by IA 545 Madison Assoc.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(23)</TD><TD>Includes 11,675 shares held directly by Mr. Koch and 42 shares held directly by Mr. Koch and his wife, 15,000 shares issuable
upon the conversion of outstanding convertible notes held by Mr. Koch and his wife and 15,000 shares issuable upon exercise of
outstanding warrants held by Mr. Koch and his wife.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(24)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(25)</TD><TD>Includes 84 shares held directly, 30,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(26)</TD><TD>Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that Charles F. Mitchell, as manager, has sole voting and dispositive power over the securities
held by Mitchell Family Investments II, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="color: windowtext">(27)</FONT></TD><TD>Includes 4,861 shares held directly, 149,533 shares issuable upon conversion of notes and 249,533 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Mark R. Patterson, as member, has sole voting and dispositive power
over the securities held by the MRP Holdings LLC. Mr. Patterson is the Chief Executive Officer and a director of Boomerang. See
also &ldquo;Certain Relationships and Related Transactions.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(28)</TD><TD>Includes 68,256 shares held directly, 20,000 shares issuable upon conversion of notes and 90,200 shares issuable upon exercise
of warrants. Also includes 50,384 shares held by James Mulvihill, Heather Mulvihill&rsquo;s husband, and 27,388 shares, 59,745
shares issuable upon conversion of notes and 109,745 shares issuable upon exercise of warrants by James Mulvihill&rsquo;s TTEE
PSP and over which Ms. Mulvihill is deemed to have beneficiary ownership.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(29)</TD><TD>Includes 33,889 shares held directly, 5,000 shares issuable upon conversion of notes and 15,994 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(30)</TD><TD>Includes 15,000 shares issuable upon conversion of notes and 15,000 shares issuable upon exercise of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(31)</TD><TD>Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(32)</TD><TD>Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(33)</TD><TD>Includes 279 shares held directly, 120,000 shares issuable upon conversion of notes and 120,000 shares issuable upon exercise
of warrants. Robert M. Stafford, General Partner of Pacific Asset Partners, has voting and dispositive power over the securities
held by Pacific Asset Partners</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(34)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(35)</TD><TD>Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(36)</TD><TD>Includes 2,890 shares held directly, 95,589 shares issuable upon conversion of notes and 95,589 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(37)</TD><TD>Includes 1,880 shares held directly, 72,059 shares issuable upon conversion of notes and 72,059 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(38)</TD><TD>Includes 127,307 shares held directly, 172,622 shares issuable upon conversion of notes, 172,622 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Gail Mulvihill, as sole member, has sole voting and dispositive power
over the securities held by Sail Energy LLC. Gail Mulvihill is one of our principal stockholders. See also &ldquo;Certain Relationships
and Related Transactions.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 78; Value: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->71<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(39)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Justin Yorke, as managing member, has sole voting and dispositive
power over the securities held by San Gabriel Fund, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(40)</TD><TD>Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(41)</TD><TD>Includes 470 shares held directly, 21,765 shares issuable upon conversion of notes and 21,765 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Victor J. Nesi, managing member, has sole voting and dispositive power
over the securities held by VN Advisors, LLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(42)</TD><TD>Includes 53,502 shares held directly, 10,000 shares issuable upon conversion of notes and 19,527 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Karen B. Cohen, as the sole stockholder, has sole voting and dispositive
power over the securities held by Vulcan Properties, Inc.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(43)</TD><TD>Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PLAN OF DISTRIBUTION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are registering the notes, warrants,
shares of common stock issuable upon conversion of the notes and exercise of the warrants to permit the resale of these securities
by the holders of securities from time to time after the date of this prospectus. We will not receive any of the proceeds from
the sale by the selling securityholders of the securities, however, we will receive proceeds from the exercise of the warrants,
to the extent the cashless exercise provision is not utilized. We will bear all fees and expenses incident to our obligation to
register the securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling securityholders may sell all
or a portion of the securities held by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the securities are sold through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts or commissions or agent&rsquo;s commissions. The public offering price for the warrants
will be $2.26 per warrant. In calculating this price, we used the Black-Scholes option pricing model, which utilizes inputs such
as the closing price of our common stock, exercise price of the warrants, assumed dividend yield, assumed risk-free interest rate,
expected volatility and expected term. The public offering price for the notes will be the principal amount of the note. The public
offering price for the common stock will be $6.00 per share until the shares of common stock are quoted on a national securities
exchange or the OTC Bulletin Board at which time the shares of common stock will be sold at prevailing market prices or at privately
negotiated prices. There can be no assurance our common stock will be quoted on a national securities exchange or the OTC Bulletin
Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These sales may be effected in transactions,
which may involve crosses or block transactions, pursuant to one or more of the following methods:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in the over-the-counter market;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in transactions otherwise than on these exchanges or systems or in the over-the-counter market;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>privately negotiated transactions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>short sales made after the date the Registration Statement is declared effective by the SEC;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>broker-dealers may agree with a selling securityholder to sell a specified number of such shares at a stipulated price per
share;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a combination of any such methods of sale; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any other method permitted pursuant to applicable law.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling securityholders may also sell
the securities under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus.
In addition, the selling securityholders may transfer the securities by other means not described in this prospectus. If the selling
securityholders effect such transactions by selling the securities to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling securityholders
or commissions from purchasers of the securities for whom they may act as agent or to whom they may sell as principal (which discounts,
concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the securities or otherwise, the selling securityholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short sales of the securities in the course of hedging in
positions they assume. The selling securityholders may also sell securities short and deliver securities covered by this prospectus
to close out short positions and to return borrowed securities in connection with such short sales. The selling securityholders
may also loan or pledge the securities to broker-dealers that in turn may sell such securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling securityholders may pledge or
grant a security interest in some or all of the notes, warrants or shares of common stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties may offer and sell the securities from time to time
pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act amending, if necessary, the list of selling securityholders to include the pledgee, transferee or other successors in interest
as selling securityholders under this prospectus. The selling securityholders also may transfer and donate the securities in other
circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the extent required by the Securities
Act and the rules and regulations thereunder, the selling securityholders and any broker-dealer participating in the distribution
of the securities may be deemed to be &ldquo;underwriters&rdquo; within the meaning of the Securities Act, and any commission paid,
or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the securities is made, a prospectus supplement, if required, will be
distributed, which will set forth the aggregate amount of the securities being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the
selling securityholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The securities covered by this prospectus
will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition,
in certain states, the securities covered by this prospectus may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
We have not taken any steps to register, or otherwise permit the sale of, the securities covered by this prospectus under any state
laws. Each of the selling securityholders is required to take all necessary steps to meet state law requirements prior to selling
any securities under this prospectus. Potential investors should consider getting representations from the applicable selling securityholder
confirming that such selling securityholder has complied with all applicable state laws in order to confirm that the purchase by
such investor complies with applicable state laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There can be no assurance that any selling
securityholder will sell any or all of the securities registered pursuant to the registration statement, of which this prospectus
forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling securityholders and any other
person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any of the securities by the selling securityholders and any other participating
person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the securities
to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the
securities and the ability of any person or entity to engage in market-making activities with respect to the securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will pay all expenses of the registration
of the securities pursuant to the registration rights agreement; provided, however, a selling securityholder will pay all underwriting
discounts and selling commissions, if any. We will not receive any proceeds from the sale of the securities, however, we will receive
proceeds from the exercise of the warrants, to the extent the cashless exercise provision is not utilized. We will indemnify the
selling securityholders against liabilities, including some liabilities under the Securities Act in accordance with the registration
rights agreements or the selling securityholders will be entitled to contribution. We may be indemnified by the selling securityholders
against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished
to us by the selling securityholder specifically for use in this prospectus, in accordance with the related registration rights
agreements or we may be entitled to contribution.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">DESCRIPTION OF SECURITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summarizes the material provisions
of the securities offered by the selling securityholders, our capital stock and important provisions of our certificate of incorporation
and bylaws. This summary is not complete and is qualified by our certificate of incorporation, bylaws, form of note and form of
warrant, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part and by the
provisions of applicable law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of the date of this prospectus, our authorized
capital stock consists of 400,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of preferred stock,
par value $0.01 per share. As of September 13, 2012, there were 7,399,086 shares of common stock and no shares of preferred stock
will be outstanding. If all of the notes and warrants covered by this prospectus were converted or exercised, then, as of September
13, 2012, there would have been 9,933,886 shares of common stock outstanding. This number assumes no conversion of 2011 Notes,
which are convertible into an aggregate of 2,735,206 shares of common stock, and no exercise of outstanding options and other warrants
that, as of the date of this prospectus are exercisable to purchase an aggregate of 8,071,951 shares of common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Holders of our common stock are entitled
to one vote per share on all matters to be voted upon by the stockholders, and do not have cumulative voting rights. A plurality
of the votes cast in the election of directors is sufficient to elect nominees to our board of directors. The holders of common
stock are entitled to receive dividends as may be declared by the board of directors, provided that no dividends or other distributions
on our common stock may be paid, nor may any shares of our common stock be purchased, redeemed or otherwise acquired for value
by us if any shares of our Series A Convertible Preferred Stock are outstanding. Upon our liquidation, dissolution or winding up,
and subject to any prior rights of outstanding preferred stock, the holders of our common stock will be entitled to share pro rata
in the distribution of all of our assets available for distribution to our stockholders after satisfaction of all of our liabilities
and the payment of the liquidation preference of any preferred stock that may be outstanding. There are no redemption or sinking
fund provisions applicable to our common stock. All outstanding shares of common stock are fully paid and non-assessable. The holders
of our common stock have no preemptive or other subscription rights to purchase our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">2012 Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2012 notes are 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest accrues on the 2012 notes at 6%
per annum. Interest is payable quarterly, commencing on June 30, 2012, with respect to the 2012 notes issued in June 2012, and
September 30, 2012, with respect to the 2012 notes issued in July 2012. At our option, interest may be payable in: (i) cash or
(ii) shares of the Common Stock. If the we elect to pay interest in shares of our common stock on an interest payment date, the
number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable
on such interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the last sale price of the common
stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date, or the average price, if the ADTV of the common stock for the ten (10) trading days prior to the interest payment date is
less than $100,000 per day, provided, however if the ADTV is equal to or greater than $100,000, it will be the average price, and
not the conversion price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The outstanding principal amount of the
2012 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the 2012 notes plus accrued and unpaid interest thereon, by the conversion price
in effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2012 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933 without restriction as to volume or manner of sale, and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an event of default as defined in the
2012 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 notes then
outstanding to be due and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For so long as the 2012 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2012 notes, we
may not:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the 2012 notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2012 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-weight: normal">&middot;</FONT></TD><TD><FONT STYLE="font-weight: normal">permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or such subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii)
purchase or otherwise acquire for value, directly or indirectly, any shares or other equity security of our company, other than
the 2012 notes or 2012 warrants.</FONT></TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">2012 Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 2012 warrants are exercisable at $5.00
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally,
the exercise price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of our common
stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the Warrant if
such exercise would result in such holder&rsquo;s total ownership of our common stock exceeding 4.9%. The Warrants expire on June
14, 2017.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">2011 Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The notes are convertible into common stock
at $4.25 per share, referred to as the Conversion Price, subject to weighted average adjustment for issuances of common stock or
common stock equivalents below the Conversion Price, subject to certain exceptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest accrues on the notes at 6% per
annum. Interest is payable quarterly, commencing on December 31, 2011, at the Company&rsquo;s option, interest may be payable in:
(i) cash or (ii) shares of the common stock. If the Company elects to pay interest in shares of its common stock on an interest
payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid
interest payable on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale
price of the common stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding
such interest payment date, referred to as the &ldquo;Average Price, if the average daily trading volume, referred to as the ADTV
of the common stock for the ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however
if the ADTV is equal to or greater than $100,000, it will be the Average Price, and not the Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The outstanding principal amount of the
notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined by
dividing the outstanding principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect
on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common stock
on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon
conversion of the notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated under the
Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If an event of default as defined in the
notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the note then outstanding
to be, due and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For so long as the notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the notes, the Company
may not:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon the Company's balance sheet as liabilities and which would
be senior or pari passu in right of payment to the notes, except for: (i) secured or unsecured debt issued to a bank or financial
institution on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>may not permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary
for services actually rendered, as approved by the Board of Directors of the Company as fair in all respects to the Company, (ii)
reimbursement for expenses incurred on behalf of the Company, (iii) transactions and written arrangements in existence on the date
of the initial issuance of the notes, and any amendments, modifications, cancellations, terminations, limitations and waivers approved
by a majority of the independent disinterested directors of our company; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>may not permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock
or such subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii) purchase or otherwise acquire
for value, directly or indirectly, any shares or other equity security of the Company, other than the notes or warrants.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">2011 Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Warrants are exercisable at $4.25 per
share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Cashless exercise
is permitted if the average trading volume of the Company&rsquo;s common stock during at least five (5) of the ten (10) consecutive
trading days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average
of the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise. In certain
instances, a holder shall not be permitted to exercise the Warrant if such exercise would result in such holder&rsquo;s total ownership
of the Company&rsquo;s common stock exceeding 4.9%. Depending on when the warrants were issued, the warrants expire on November
1, 2016, November 18, 2016 or December 9, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>



<P STYLE="margin: 0"></P>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">Preferred
Stock </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subject to the provisions of the certificate
of incorporation and limitations prescribed by law, the board of directors has the authority, without further vote or action by
the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions of the preferred stock, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>dividend rights;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>dividend rates;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>conversion rates;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>voting rights;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>terms of redemption;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>redemption prices;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>liquidation preferences;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>sinking funds;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>other rights, preferences and restrictions applicable to each series; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the number of shares constituting any series or the designation of the series, which may be senior to those of the common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">We have no present plans to issue any shares
of preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">One of the effects of undesignated preferred
stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means
of a tender offer, proxy contest, and merger or otherwise, and, as a result, protect the continuity of our management. The issuance
of shares of the preferred stock under the board of directors&rsquo; authority described above may adversely affect the rights
of the holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly,
the issuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the market
price of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Other Outstanding Options and Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of September 13, 2012, we have outstanding
common stock purchase warrants to purchase an aggregate of 7,430,566 shares of our common stock exercisable at prices ranging from
$2.00 to $25.00 and expiring on various dates commencing February 2013 through August 2016. These warrants were issued primarily
in connection with capital raising transactions we engaged in prior to this offering as well as for services rendered. The warrants
are subject to customary anti-dilution rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Also as of September 13, 2012, we have outstanding
options to purchase an aggregate of 641,385 shares of our common stock exercisable at prices ranging from $2.00 to $18.00 and expiring
on various dates commencing February 2013 through October 2020. These options were granted primarily as an inducement to the employment
of various employees, consultants and contractors. The warrants are subject to customary anti-dilution rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>Preemptive Right</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Patterson&rsquo;s amended employment
agreement provides him with a preemptive right, pursuant to which Mr. Patterson has the right, but not the obligation, to maintain
his then pro rata share of our issued and outstanding shares and warrants by purchasing additional shares and warrants each time
we offer shares and/or warrants for sale.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Certificate of Incorporation and Bylaws</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Limitation of Liability of Officers
and Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our certificate of incorporation provides
that no director shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for any breach of the director&rsquo;s duty of loyalty to us or our stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>under Section 174 of the Delaware General Corporation Law for unlawful payment of a dividend or unlawful stock purchase or
stock redemption; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>for any transaction from which the director derived an improper personal benefit.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">To the extent that the Delaware General Corporation
Law is amended to provide for further limitations on the personal liability of our directors, our certificate of incorporation
shall be deemed to include such further limitations. Our second amendment and restated bylaws also provide, with certain exceptions,
for indemnification to the fullest extent permitted by the Delaware General Corporation Law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have also entered into indemnification
agreements with all of our directors, other than Mark Patterson. These indemnification agreements, among other things,</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide for indemnification which mirrors the provisions of the Delaware General Corporation Law;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide for the mandatory advancement by us of expenses incurred by the director, provided that such director will repay the
amounts advanced if it is determined that the director was not entitled to be indemnified by us;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide further indemnification to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically
authorized in our certificate of incorporation, as amended, or second amendment and restated bylaws, or the Delaware General Corporation
Law; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide that if the Delaware General Corporation Law is subsequently amended to increase the rights of directors to indemnification,
those increased rights will be deemed to apply to us, but if such rights are narrowed, there will be no affect on the indemnification
granted to the directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">However, a director is not entitled to indemnification
under these agreements with respect to (i) claims initiated by the director (except claims relating to the director&rsquo;s right
to indemnification), (ii) claims relating to the director&rsquo;s right to indemnification that a court of competent jurisdiction
determines were not made in good faith or were frivolous; (iii) expenses or liabilities for which a directors&rsquo; and officers&rsquo;
liability insurance policy has paid the director directly; or (iv) expenses or payment of profits arising from the violation by
the director of Section 16(b) of the Exchange Act, or any successor statute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Patterson&rsquo;s employment agreement
provides that we will indemnify him to the greatest extent permitted by Section 145 of the Delaware General Corporation Law. These
indemnification rights will survive the termination of Mr. Patterson&rsquo;s employment for any reason.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The effect of these provisions is to eliminate
our rights and our stockholders&rsquo; rights, through stockholders&rsquo; derivative suits on our behalf, to recover monetary
damages against a director for a breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior,
except in the situations described above.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Business Combination Under
Delaware Law</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to the provisions of Section
203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging
in a &ldquo;business combination&rdquo; with an &ldquo;interested stockholder&rdquo; for a period of three years after the date
of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed
manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 203 defines a &ldquo;business combination&rdquo;
as a merger, asset sale or other transaction resulting in a financial benefit to, or increased ownership of us by, the interested
stockholders. A &ldquo;business combination&rdquo; includes a merger or sale of more than 10.0% of our assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 203 defines an &ldquo;interested
stockholder&rdquo; as:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a stockholder who owns 15% or more of our outstanding voting stock; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our affiliate or associate that was the owner of 15% or more of our outstanding voting stock at any time within the three-year
period immediately prior to the date of determination of whether such person is an interested stockholder, and the affiliates and
associates of such person.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under Section 203, a business combination
between us and an interested stockholder is prohibited unless:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming
an interested stockholder prior to the date the person attained such status;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding, for purposes of determining
the number of shares outstanding, shares owned by persons who are directors and also officers, and employee stock plans under which
employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in
a tender or exchange offer; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the business combination is approved by our board of directors on or subsequent to the date the person became an interested
stockholder and is authorized at an annual or special meeting of the stockholders by the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">This provision has an anti-takeover effect
with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might
result in a premium over the market price for the shares of our common stock. With approval of our stockholders, we could amend
our certificate of incorporation in the future to elect not to be governed by the anti-takeover law.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amendment of Bylaws</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our bylaws may generally be altered, amended
or repealed, and new bylaws may be adopted, by:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the affirmative vote of holders of not less than 75% of the voting power of our outstanding shares of capital stock entitled
to vote in the election of directors, voting together as a single class; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the affirmative vote of a majority of directors present at any regular or special meeting where there is a quorum of directors
present, provided that any alteration, amendment or repeal of, or adoption of any bylaw inconsistent with, specified provisions
of the bylaws, including those related to special and annual meetings of stockholders, the number and term of directors, nomination
of directors, special meetings of directors, removal of directors, committees of the board of directors and indemnification of
directors and officers, requires the affirmative vote of at least 75% of all directors then in office at a regular or special meeting
called for that purpose.</TD></TR></TABLE>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other Limitations on Stockholder
Actions</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our bylaws also impose some procedural requirements
on stockholders who wish to:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>make nominations in the election of directors;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>propose that a director be removed; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>propose any other business to be brought before an annual meeting of stockholders.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under these procedural requirements, a stockholder
nomination must include evidence that the nominator is a stockholder, and should include:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the name and address of the nominator;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the number of shares of each class or series of our capital stock beneficially owned by the nominator;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the name and address of each of the persons with whom the nominator is acting in concert, and the number of shares of our capital
stock beneficially owned by such persons; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a description of all arrangements or understandings between the nominator and the nominee pursuant to which the nomination
is being made.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The nominator must also provide biographical
information on their nominee, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the nominee&rsquo;s name, age, business address and residence address;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the principal occupation or employment of the nominee;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the number of shares of our capital stock beneficially owned by the nominee;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the written consent of the nominee to having such person&rsquo;s name placed in nomination at the meeting and to serve as a
director as elected;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any other information regarding the nominee that is required pursuant to Regulation 14A of the Exchange Act; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a notarized affidavit from the nominee stating that, if elected, he or she will serve and he or she is eligible for election
as a member of our board of directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To bring a proposal to remove a director
before an annual meeting of our stockholders, a stockholder must deliver to our Secretary:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>notice of the proposal;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a statement of the grounds on which such director is proposed to be removed;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the number of shares beneficially owned by the stockholder and evidence of such ownership;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a list of the names and address of the other beneficial owners of shares of our capital stock with whom the stockholder is
acting in concert, and the number of shares beneficially owned by each such beneficial owner.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to bring any other proposal before
an annual meeting of stockholders, a stockholder must deliver timely notice of a proposal pertaining to a proper subject for presentation
at the meeting to our corporate secretary along with the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a brief description of the business to be brought before the meeting and the reasons for conducting such business at the meeting;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the name and address of the stockholder proposing such business;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>the number of shares beneficially owned by the stockholder and evidence of such ownership;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a description of all arrangement or understandings between such stockholder and any other person or persons (including their
names and the number of our shares beneficially owned by them) in connection with the proposal of such business;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any material interest of the stockholder in the proposal; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business
before the meeting.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To be timely in connection with an annual
meeting of stockholders, a stockholder must generally deliver notice of a nomination, proposal to remove a director, or other business
not less than 120 nor more than 180 days prior to the date on which the annual meeting of stockholders was held in the immediately
preceding year, but in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the
anniversary date of the preceding annual meeting of stockholders, a stockholder notice will be timely if received by us not later
than the close of business on the later of (1) the 120th day prior to the annual meeting and (2) the 10th day following the day
on which we first publicly announce the date of the annual meeting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To be timely in connection with the election
of a director at a special meeting of stockholders, a stockholder nomination must be received not less than 40 nor more than 60
days prior to the date of the special meeting, but in the event that less than 55 days&rsquo; notice or prior public disclosure
of the date of the special meeting of the stockholders is given or made to the stockholders, a stockholder nomination will be timely
if received by us not later than the close of business on the 10th day following the day on which a notice of the date of the special
meeting was mailed to the stockholders or the public disclosure of that date was made.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Registration Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Two holders of an aggregate 60,000 shares
of our common stock and a warrant to purchase 60,000 shares of our common stock have the right to have such shares, including the
shares issuable on exercise of the warrant, included in any registration statement to be filed by us under the Securities Act,
subject to the right of the underwriter in such offering the reduce the number of the holder&rsquo;s shares to be registered in
view of market conditions. We have filed a registration statement covering such securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a registration rights
agreement with the subscribers and the placement agent in connection with the private placement of the notes and warrants. Pursuant
to the registration rights agreement, we agreed to file a registration statement within 90 days after the closing date of the offering
to register for resale or the notes, the warrants, the shares of common stock issuable upon conversion of the notes and exercise
of the warrants (collectively, referred to as the Registrable Securities). In the event that the SEC limits the number of Registrable
Securities that may be included in the registration statement, we shall include only those Registrable Securities permitted by
the Securities and Exchange Commission, or SEC, and shall file additional registration statements at the earliest practicable date
as we are permitted to do so in accordance with SEC guidelines. We shall use our best efforts to cause (i) the Registration Statement
to be effective within 150 days of the offering, and (ii) any additional registration statements to be declared effective within
90 days of the required filing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Securities
an amount equal to 1% of the original principal amount of the investor&rsquo;s note, multiplied by a fraction with the numerator
equal to the number of Registrable Securities that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the notes and exercise of the warrants purchased pursuant
to the subscription agreement and owned by such holder.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Transfer Agent and Registrar</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The transfer agent and warrant agent and
registrar for our common stock is American Stock Transfer &amp; Trust Company. Its address is 6201 15th Avenue, Brooklyn, NY 11219,
and its telephone number is (718) 921-8261.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">MATERIAL U.S. FEDERAL
INCOME TAX CONSIDERATIONS</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
following is a general discussion of certain material U.S. federal income tax consequences relevant to U.S. holders (as described
below) of Notes, common stock received upon conversion of the Notes or exercise of the Warrants (the &ldquo;common stock&rdquo;)
and, in certain circumstances, Warrants. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">For
purposes of this discussion, a &ldquo;U.S. holder&rdquo; means a beneficial owner of a Note, common stock, or a Warrant that is
any of the following for U.S. federal income tax purposes:</FONT></P>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">An individual who is a citizen or resident of the United States or someone treated as a U.S.
citizen for U.S. federal income tax purposes;</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof, or the District of Columbia (and certain entities
formed outside the United States and treated as U.S. corporations under specialized sections of the Internal Revenue Code of 1986,
as amended (the &ldquo;Code&rdquo;));</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">An estate, the income of which is subject to U.S. federal income taxation regardless of its
source; or</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">A trust if: (a) a U.S. court can exercise primary supervision over the trust&rsquo;s administration
and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (b) the trust was in existence
on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations (as defined below) to be treated as
a U.S. person.</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">This
summary is for general information purposes only and is not exhaustive of all of the U.S. federal income tax considerations that
may be relevant to a decision to purchase Notes, common stock, or Warrants, nor any tax consequences arising under other federal
tax laws (e.g., estate and gift tax) or under the laws of any state, local or foreign jurisdiction. This discussion is based upon
current provisions of the Code, Treasury Regulations promulgated under the Code by the U.S. Treasury Department (including proposed
and temporary regulations (the &ldquo;Treasury Regulations&rdquo;)), rulings, current administrative interpretations, and official
pronouncements by the Internal Revenue Service (the &ldquo;IRS&rdquo;), and judicial decisions, all as currently in effect and
all of which are subject to differing interpretations or to change, including possibly with a retroactive effect. Such changes
could materially and adversely affect the tax consequences to a holder described below. No assurance can be given that the IRS
will not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">In
addition, the possible application of U.S. federal estate or gift taxes or any aspect of state, local, or non-U.S. tax laws is
not considered. This summary does not address all aspects of U.S. federal income taxation that may be important to a particular
U.S. holder in light of its investment or tax circumstances. This summary is not intended to be applicable to special categories
of investors, including but not limited to dealers in securities, banks, insurance companies, real estate investment trusts, regulated
investment companies, controlled foreign corporations, tax-exempt organizations, U.S. expatriates, persons that hold the Notes,
common stock and Warrants as part of a straddle or conversion transaction, partnerships or other pass-through entities that purchase,
own or dispose of the Notes, common stock and Warrants, and holders subject to the alternative minimum tax.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">In
addition, this discussion is limited to U.S. holders who hold the Notes, common stock, and Warrants as capital assets (generally
property held for investment), and initial purchasers of Notes who acquire the Notes at the original issue price within the meaning
of Section 1273 of the Code. This summary also assumes that the IRS will respect the classification of the Notes as indebtedness
for U.S. federal income tax purposes. We have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the
U.S. federal income tax consequences of acquiring or holding a Note, common stock, or Warrant.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">If
a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds a Note,
common stock, or Warrant, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the
status of the partner and the activities of the partnership. A holder of a Note, common stock, or Warrant that is a partnership
and partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of holding
and disposing of the Note, common stock, or Warrant.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">THE
FOREGOING SUMMARY OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. IT DOES NOT
DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A U.S. HOLDER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. PROSPECTIVE U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES THAT
WOULD RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, COMMON STOCK, AND WARRANTS, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS (INCLUDING ESTATE AND GIFT TAX RULES) AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS, AS WELL AS THE APPLICATION UNDER ANY APPLICABLE TAX TREATY.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>Issuance
of a Unit</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">A
Note and Warrant will constitute an investment unit (a &ldquo;Unit&rdquo;). For purposes of determining a U.S. holder&rsquo;s basis
in each Unit, the amount paid to acquire the Unit will be allocated between the Note and Warrant based on their respective relative
fair market values as determined by the Company. The allocation by the Company will be binding on each U.S. holder, unless the
U.S. holder explicitly discloses (in a statement attached to the U.S. holder&rsquo;s timely filed U.S. federal income tax return
for the year that includes the acquisition date of the Unit) that his allocation of a Unit&rsquo;s issue price between the Notes
and the Warrants is different from the Company&rsquo;s allocation. The Company&rsquo;s determination of the allocation is not binding
on the IRS and is not necessarily indicative of prices at which the Notes or Warrants may actually trade. The balance of this discussion
assumes that the Company&rsquo;s allocation will be respected for U.S. federal income tax purposes. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>Exchange
of Outstanding Debentures of the Company for Units</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt; font-style: normal">Certain
holders were issued Units in exchange for the cancellation of outstanding notes or debentures of the Company (the &ldquo;Debentures&rdquo;).
It is our understanding, and the following discussion assumes, that the face amount of each U.S. holder&rsquo;s retired Debenture
is equal to the fair market value of the Units issued to each holder as determined on the date of issuance</FONT><FONT STYLE="font-size: 10pt">
<FONT STYLE="font-style: normal">and, therefore, there is no cancellation of indebtedness income. However, this determination
is not binding on the IRS, and the IRS may take a contrary position regarding this issue.</FONT></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal"><B>U.S.
Holders </B></FONT><FONT></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Original Issue Discount </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The allocation of a portion of the purchase
price to the Warrants will cause the Notes to be issued with original issue discount (&ldquo;OID&rdquo;) for United States federal
income tax purposes. Accordingly, each U.S. Holder will be required to include in income (regardless of whether such U.S. Holder
is a cash or accrual basis taxpayer) in each taxable year, in advance of the receipt of cash payments on such Notes, that portion
of the OID, computed on a constant interest rate basis, attributable to each day during such year on which the U.S. Holder held
the Note. See &ldquo;U.S. Holders &mdash; Taxation of Original Issue Discount&rdquo; below. The amount of OID with respect to each
Note will be equal to the excess of (i) its &ldquo;stated redemption price at maturity&rdquo; over (ii) its &ldquo;issue price.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the OID Regulations, the &ldquo;stated
redemption price at maturity&rdquo; of each Note will include all payments to be made in respect thereof, other than payments of
&ldquo;qualified stated interest&rdquo; (i.e., interest that is unconditionally payable at least annually).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
&ldquo;issue price&rdquo; of the Notes is the first price at which a substantial amount of the Notes are sold. For this purpose,
sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or
wholesalers are ignored. Because the Notes were issued as part of an &ldquo;investment unit&rdquo; for United States federal income
tax purposes, the first price at which a substantial amount of the Notes are sold will be determined by allocating the issue price
to the Notes and Warrants based on their relative fair market values, as determined on the date of issuance.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Taxation of Original Issue Discount<FONT STYLE="font-style: normal">
</FONT></B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">A
U.S. holder of a debt instrument issued with OID is required to include in its gross income for U.S. federal income tax purposes
an amount equal to the sum of the &ldquo;daily portions&rdquo; of such OID for all days during the taxable year in which such holder
holds the debt instrument, including the purchase date and excluding the disposition date. The daily portions of OID required to
be included in a U.S. holder&rsquo;s gross income in a taxable year will be determined on a constant interest rate basis by allocating
to each day during the taxable year on which the holder holds the debt instrument a pro rata portion of the OID on such debt instrument
which is attributable to the &ldquo;accrual period&rdquo; in which such day is included. The amount of the OID on a Note attributable
to each accrual period will be the product of (i) its &ldquo;adjusted issue price&rdquo; at the beginning of such accrual period
multiplied by (ii) its &ldquo;yield to maturity.&rdquo; The &ldquo;adjusted issue price&rdquo; of a Note at the beginning of an
accrual period will be its issue price plus the aggregate amount of OID that accrued in all prior accrual periods (determined without
regard to the rules described below concerning acquisition premium) less any cash payments on the Note. The Note&rsquo;s &ldquo;yield
to maturity&rdquo; is that discount rate which, when used in computing the present value of all principal and stated interest payments
to be made on a Note, produces an amount equal to its issue price. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Acquisition Premium</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a U.S. holder purchases a Note issued
with OID at an &ldquo;acquisition premium,&rdquo; the amount of OID that the U.S. holder includes in gross income is reduced to
reflect the acquisition premium. A Note is purchased at an acquisition premium if its adjusted basis, immediately after its purchase,
is (a) less than or equal to the sum of all amounts payable on the Note after the purchase date other than payments of qualified
stated interest and (b) greater than the Note&rsquo;s issue price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a Note is purchased at an acquisition
premium, the U.S. holder reduces the amount of OID that otherwise would be included in income during an accrual period by an amount
equal to (i) the amount of the OID otherwise includible in income multiplied by (ii) a fraction, the numerator of which is the
excess of the adjusted basis of the note immediately after its acquisition by the purchaser over the issue price of the Note and
the denominator of which is the excess of the sum of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note&rsquo;s issue price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As an alternative to reducing the amount
of OID that otherwise would be included in income by this fraction, the U.S. holder may elect to compute OID accruals by applying
the constant yield method described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Market Discount</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a U.S. holder acquires a Note at a cost
that is less than its issue price, the amount of such difference is treated as market discount for U.S. federal income tax purposes,
unless such difference is <I>de minimis</I>. Such difference will be <I>de minimis </I>if it is an amount less than .0025 multiplied
by the stated redemption price at maturity of the note multiplied by the number of complete years to maturity of the note (from
the date of acquisition). The Company does not believe that the OID on the Notes should not be treated as <I>de minimis</I> for
these purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the market discount rules of the Code,
a U.S. holder is required to treat any payment that does not constitute a payment of qualified stated interest on, or any gain
on the sale, exchange, retirement, or other disposition of, a Note as ordinary income to the extent of the accrued market discount
that has not previously been included in income. If such Note is disposed of by the U.S. holder in certain otherwise nontaxable
transactions, accrued market discount must be included as ordinary income by the U.S. holder as if the holder sold the Note at
its then fair market value. If a Note with accrued market discount is converted into common stock pursuant to the conversion feature,
the amount of such accrued market discount not previously included in income generally will be taxable as ordinary income on the
disposition of the common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, the amount of market discount
that has accrued is determined on a ratable basis. A U.S. holder may, however, elect to determine the amount of accrued market
discount on a constant yield to maturity basis. This election is made on a note-by-note basis and is irrevocable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to Notes with market discount,
a U.S. holder may not be allowed to deduct immediately a portion of the interest expense on any indebtedness incurred or continued
to purchase or to carry the Notes. A U.S. holder may elect to include market discount in income currently as it accrues, in which
case the interest deferral rule set forth in the preceding sentence will not apply. This election will apply to all debt instruments
acquired by the U.S. holder on or after the first day of the first taxable year to which the election applies and is irrevocable
without the consent of the IRS. A U.S. holder&rsquo;s tax basis in a Note will be increased by the amount of market discount included
in the holder&rsquo;s income under the election.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Interest Deduction for the Company</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At the Company&rsquo;s option, interest
on the Notes may be payable in: (i) cash or (ii) shares of common stock. Because interest on the Company&rsquo;s Notes is payable
in equity at the Company&rsquo;s option and there is substantial certainty that the option will be exercised, the Company will
generally be denied a deduction for interest paid or accrued on the Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Sale, Exchange or Other Taxable
Disposition of the Notes</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Upon the sale, exchange, or other taxable
disposition of a Note, a U.S. holder generally will recognize U.S. source gain or loss equal to the difference between the amount
realized upon the sale, exchange, or other disposition (less an amount equal to any accrued but unpaid interest, which will be
taxable as interest income to the extent not previously included in income tax by the U.S. holder) and the adjusted tax basis of
the Note. A U.S. holder&rsquo;s adjusted tax basis in a Note will, in general, be its cost of that Note to such U.S. holder (i.e.,
the portion of the Unit purchase price allocated to such Note), increased by any OID and any market discount that the U.S. holder
previously elected to include in income prior to the disposition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subject to the discussion of market discount
above, any gain or loss will be capital gain or loss to the U.S. holder. Capital gains of noncorporate U.S. holders (including
individuals) derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. Currently,
the long-term capital gains rate is 15%, although the actual rates may be higher due to the phase out of certain tax deductions,
exemptions and credits. After 2012, the maximum rate on long-term capital gains is scheduled to be 20%. However, given the uncertain
economic conditions in the United States and the size of the federal deficit, tax rates are subject to change and prospective U.S.
holders should consult their tax advisors. The deductibility of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Conversions of Notes into Common Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A U.S. holder generally will not recognize
any income, gain, or loss upon conversion of a Note into common stock except that the fair market value of the common stock received
with respect to accrued interest (which will be taxable as ordinary interest income) and except with respect to cash received in
lieu of a fractional share of common stock. The adjusted tax basis of shares of common stock received on conversion will equal
the adjusted tax basis of the Note converted (increased by the amount of income recognized upon conversion with respect to accrued
interest, and reduced by the portion of adjusted tax basis allocated to any fractional share of common stock exchanged for cash).
The holding period of such common stock received on conversion will generally include the period during which the converted Note
was held prior to conversion, except that the holding period of any common stock received with respect to accrued interest will
commence on the date after conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash received in lieu of a fractional share
of common stock should generally be treated as a payment in exchange for such fractional share of common stock, not a dividend.
Gain or loss recognized on the receipt of cash paid in lieu of such fractional share generally will equal the difference between
the amount of cash received and the amount of tax basis allocable to the fractional share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Constructive Distributions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The conversion price of the Notes and Warrants
are subject to adjustment under certain circumstances. Section 305 of the Code and the Treasury Regulations issued thereunder may
treat the U.S. holders of the Notes and Warrants as having received a constructive distribution, resulting in ordinary income (subject
to a possible dividends received deduction in the case of corporate holders) to the extent of our current and/or accumulated earnings
and profits, if, and to the extent that, certain adjustments in the conversion price (particularly an adjustment to reflect a taxable
dividend to holders of common stock) increase the proportionate interests of the holders in our assets or earnings and profits.
Such a constructive distribution may occur whether or not such holder ever exercises its conversion privilege. Therefore, U.S.
holders may recognize income in the event of a deemed distribution even though they may not receive any cash or property. Moreover,
if there is not a full adjustment to the conversion ratio of the Notes and/or Warrants to reflect an event increasing the proportionate
interest of the holders of outstanding common stock in our assets or earnings and profits, then such increase in the proportionate
interest of the holders of the common stock generally will be treated as a distribution to such holders, taxable as ordinary income
(subject to a possible dividends received deduction in the case of corporate holders) to the extent of our current and/or accumulated
earnings and profits. Adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula which has
the effect of preventing dilution in the interest of the holders of the debt instruments, however, will generally not be considered
to result in a constructive dividend distribution. The rules with respect to adjustments are complex and holders of Notes and Warrants
should consult their own tax advisors regarding the applicability of such rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Warrants to Purchase Common Stock</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Generally,
no U.S. federal income tax will be imposed upon the U.S. holder of a Warrant upon exercise of such Warrant to acquire common stock
of the Company. <B> </B>A U.S. holder&rsquo;s tax basis in a Warrant will generally equal the portion of the issue price of the
Unit allocable to the Warrant pursuant to the rules described above under &ldquo;Issuance of a Unit.&rdquo; Upon exercise of a
Warrant, the tax basis of the common stock would be equal to the sum of the tax basis of the Warrants in the hands of the U.S.
holder plus the exercise price paid (if any), and the holding period of the new common stock would begin on the date that the Warrants
are exercised. If a Warrant lapses without exercise, the holder will generally realize a capital loss equal to its adjusted tax
basis in the Warrant. Prospective U.S. Holders should consult their tax advisors regarding the tax consequences of acquiring, holding
and disposing of Warrants.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">For
a discussion of the sale, exchange or other disposition (including repurchase by the Company) of a Warrant other than the exercise
of the Warrant, see &ldquo;U.S. Holders &mdash; Sale, Redemption or Other Taxable Disposition of Common Stock&rdquo; below.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Sale, Redemption, or Other Taxable
Disposition of Common Stock</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">For
a discussion of the sale, exchange or other taxable disposition of the common stock, see &ldquo;U.S. Holders &mdash; Sale, Exchange
or Other Taxable Disposition of the Notes&rdquo; below.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">A
redemption of common stock may be treated either as a distribution or as a sale transaction. A redemption of common stock shall
be treated as a sale transaction if all of the U.S. holder&rsquo;s interest in the Company is redeemed or certain other tests are
met which generally involve a sufficient reduction in the U.S. holder&rsquo;s interest (determined under certain constructive ownership
rules) in the Company. A redemption of Warrants will be treated as a sale transaction. If sale treatment applies, the tax treatment
of the U.S. holder will be as described below with respect to the sale of Notes (See &ldquo;U.S. Holders &mdash; Sale, Exchange
or Other Taxable Disposition of the Notes&rdquo;). Alternatively, the entire amount of the cash or property received on a redemption
may be treated as a distribution. The U.S. holder&rsquo;s basis in the redeemed common stock, to the extent not treated as reduced
through a return of capital distribution, would be transferred to the U.S. holder&rsquo;s remaining shares of the Company&rsquo;s
common stock. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Net Operating Loss Carry Forwards</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
utilization of net operating loss carry forwards is limited under the change in stock ownership rules pursuant to Section 382 of
the Code. The Company&rsquo;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. It is unknown whether this Offering would
result in further limitation on the Company&rsquo;s use of its net operating loss carry forwards.<FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP></SUP></FONT></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>New Legislation Regarding Medicare
Tax</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">For
taxable years beginning after December 31, 2012, a U.S. holder that is an individual or estate, or a trust that does not fall into
a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. Holder&rsquo;s
&ldquo;net investment income&rdquo; for the relevant taxable year and (2) the excess of the U.S. holder&rsquo;s modified gross
income for the taxable year over a certain threshold (which, in the case of individuals, will be between $125,000 and $250,000
depending on the individual&rsquo;s circumstances). A U.S. holder&rsquo;s &ldquo;net investment income&rdquo; may generally include,
among other items, certain interest, dividends, gain, and other types of income from investments, minus the allowable deductions
that are properly allocable to that gross income or net gain. A U.S. holder that is an individual, estate or trust should consult
its tax advisor regarding the applicability of the Medicare tax to certain payments relating to the Notes, common stock and Warrants.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Information Reporting and Backup
Withholding </B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Generally,
a U.S. holder may be subject to backup withholding, currently at a rate of twenty-eight percent (28%), with respect to certain
reportable payments, including interest payments (including OID), dividend payments, principal payments on the Notes, and proceeds
from the sale or other disposition of the Notes, Warrants or common stock. Unless a U.S. holder is an exempt recipient, backup
withholding may apply to such payments in certain circumstances, including if the U.S. holder:</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">fails to furnish a social security number or other taxpayer identification number (&ldquo;TIN&rdquo;)
certified under penalties of perjury within a reasonable time after a request therefor;</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">furnishes an incorrect TIN;</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">is notified by the IRS that the U.S. holder has failed to report interest or dividends properly;</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">under certain circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN furnished is correct and that the U.S. holder is not subject to backup withholding imposed by the IRS;
or</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-style: normal">&middot;</FONT></TD><TD><FONT STYLE="font-style: normal">otherwise fails to comply with backup withholding rules.</FONT></TD></TR></TABLE>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">A
U.S. holder will generally not be subject to backup withholding if it provides a properly and timely completed IRS Form W-9 to
the applicable payor. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Any
amount withheld from a payment to a U.S. holder under the backup withholding rules is creditable against the U.S. holder&rsquo;s
U.S. federal income tax liability and may entitle the U.S. holder to a refund provided that the requisite information is timely
furnished to the IRS. The Company will report to the U.S. holder and to the IRS the amount of any reportable payments for each
calendar year and the amount of tax withheld, if any, with respect to the reportable payments.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>



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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-style: normal"><B>Tax
Consequences to Non-U.S. Holders</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><B>U.S. Trade or Business
Income</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">For
purposes of the following discussion, interest, dividends and gain on the sale, exchange or other taxable disposition of a Note,
common stock or Warrants will be considered to be a &ldquo;U.S. trade or business income&rdquo; if such income or gain is (a) effectively
connected with the conduct by a Non-U.S. holder of a U.S. trade or business and (b) in the case of a Non-U.S. holder eligible for
the benefits of an applicable U.S. bilateral income tax treaty, attributable to a permanent establishment (or, in the case of an
individual, a fixed base) maintained by the Non-U.S. holder in the United States.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">If
a Non-U.S. holder&rsquo;s income and gain in respect of a Note, Warrants or common stock is U.S. trade or business income and,
if required by an applicable tax treaty as a condition for taxation, such income and gain is attributable to a United States permanent
establishment, then such Non-U.S. holder will be subject to regular U.S. federal income tax on this income and gain in generally
the same manner as U.S. holders, and U.S. federal income tax return filing requirements will apply. In the case of a Non-U.S. holder
that is a corporation, such U.S. trade or business income also may be subject to the branch profits tax (which is generally imposed
on a foreign corporation on the actual or deemed repatriation from the United States of earnings and profits attributable to U.S.
trade or business income) at a 30% rate (subject to reduction pursuant to an applicable income tax treaty). To claim the benefit
of a tax treaty or to claim exemption from withholding because the income is U.S. trade or business income, the Non-U.S. holder
must timely provide a properly executed IRS Form W-8ECI (or appropriate substitute or successor form). In addition, a Non-U.S.
holder may under certain circumstances be required to obtain a U.S. taxpayer identification number and make certain certifications
to us. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
following discussion assumes that the income and gain in respect of a Note, Warrants or common stock is not U.S. trade or business
income.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Interest on the Notes</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
gross amount of payments of interest (including a payment with respect to accrued OID, if any) to a Non-U.S. holder of interest
that are not U.S. trade or business income will generally be subject to U.S. federal income tax at the rate of 30%, unless a U.S.
income tax treaty applies to reduce or eliminate withholding. To claim the benefit of a tax treaty, the Non-U.S. holder must provide
a properly executed IRS Form W-8BEN (or appropriate substitute or successor form) prior to the payment of interest. In addition,
a Non-U.S. holder may under certain circumstances be required to obtain a U.S. taxpayer identification number and make certain
certifications to us. Special procedures are provided for payments through qualified intermediaries. A Non-U.S. holder of a Note
that is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of amounts
withheld at a higher rate by filing an appropriate claim for a refund with the IRS.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Constructive Distributions</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Any
deemed dividends resulting from certain adjustments, or failure to make adjustments, to the conversion formula (see &ldquo;&mdash;
Tax Consequences to U.S. Holders &mdash; Constructive distributions&rdquo; above) will be subject to withholding tax at a rate
of 30% or such lower rate as may be specified by an applicable tax treaty, unless they are effectively connected with such Non-U.S.
holder&rsquo;s conduct of a trade or business in the United States and, if required by an applicable income tax treaty as a condition
for taxation, are attributable to a United States permanent establishment, in which case such constructive distributions would
instead be subject to U.S. federal income tax on a net income basis as described above under &ldquo;Non-U.S. Holders &mdash; U.S.
Trade or Business Income.&rdquo; A withholding agent may be required to withhold the appropriate amount with respect to a constructive
distribution even though there is no related receipt of cash from which to satisfy the withholding obligation. Non-U.S. holders
should consult their tax advisors regarding the consequences of constructive distributions.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Conversion </B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">A
Non-U.S. holder generally will not be subject to U.S. federal income tax on the conversion of Notes into common stock. However,
gain (if any) attributable to the receipt of cash in lieu of a fractional share, or interest not previously included in gross income,
will be subject to U.S. federal income tax if it is U.S. trade or business income, and common stock received with respect to accrued
interest may be taxed as a payment of interest as described above under &ldquo;Non-U.S. Holders &mdash; Interest&rdquo;.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><B>Sales, Exchange or Other
Taxable Disposition of Notes, Common Stock or Warrants</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Except
as described below and subject to the discussion concerning backup withholding, any gain realized by a Non-U.S. holder on the sale,
exchange or other taxable disposition of a Note, common stock or Warrants generally will not be subject to U.S. federal income
tax, unless (a) such gain is U.S. trade or business income, (b) subject to certain exceptions, the Non-U.S. holder is an individual
who holds the Note, common stock or Warrants as a capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, (c) the Non-U.S. holder is subject to tax pursuant to the provisions of U.S. federal income tax
law applicable to certain U.S. expatriates (including certain former citizens or residents of the United States), or (d) we are
a United States real property holding corporation within the meaning of Section 897 of the Code. We do not believe that we are
currently a &ldquo;United States real property holding corporation&rdquo; within the meaning of Section 897 of the Code, or that
we will become one in the future.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>HIRE Act</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
Hiring Incentives to Restore Employment Act (the &ldquo;HIRE Act&rdquo;) generally provides that, beginning January 1, 2014, a
30% withholding tax may be imposed on payments of U.S. source income and proceeds from the sale of property that could give rise
to U.S. source interest or dividends to certain non-U.S. entities unless such entities enter into an agreement with the IRS to
disclose the name, address and taxpayer identification number of certain U.S. persons that own, directly or indirectly, interests
in such entities, as well as certain other information relating to such interests. Non-U.S. holders are encouraged to consult with
their own tax advisors regarding the application of the HIRE Act.<BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Information Reporting and Backup
Withholding</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Generally,
we must report annually to the IRS and to each Non-U.S. holder any interest or dividend (including the amount of any constructive
dividends paid) that is subject to U.S. federal withholding tax and the amount of any tax withheld. These reporting requirements
apply even if withholding was not required or was reduced or eliminated pursuant to an applicable income tax treaty. Copies of
these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities
of the country in which the Non-U.S. holder resides. Under certain circumstances, we will have to report to the IRS payments of
principal.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Information
reporting and backup withholding (currently at a rate of 28%) may apply to payments made by us or any agent of ours to Non-U.S.
holders if the payee fails to make the appropriate certification that the holder is a non-U.S. person or if we or our paying agent
has actual knowledge that the payee is a U.S. person.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">The
payment of the proceeds from the disposition of the Notes, common stock or Warrants to or through the U.S. office of any broker,
U.S. or foreign, will be subject to information reporting and possible backup withholding, as discussed above, unless the owner
certifies as to its Non-U.S. holder status under penalty of perjury or otherwise establishes an exemption, provided that the broker
does not have actual knowledge that the holder is a U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a Note, common stock or Warrants to or through a non-U.S. office
of a non-U.S. broker that is not a U.S. related person will generally not be subject to backup withholding. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">However,
if such broker is (a) a U.S. person, (b) a controlled foreign corporation for United States tax purposes, (c) a foreign person
50% or more of whose gross income from all sources for certain periods is effectively connected with a United States trade or business
or (d) a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons (as defined in Treasury
Regulations) who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during
its tax year, such foreign partnership is engaged in a U.S. trade or business, such payments will be subject to information reporting,
but not backup withholding, unless such broker has documentary evidence in its files of the Non-U.S. holder&rsquo;s foreign status
and certain other conditions are met or you otherwise establish an exemption. Both backup withholding and information reporting
will apply to the proceeds of such dispositions if the broker has actual knowledge that the payee is a U.S. person.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal">Any
amounts withheld under the backup withholding rules from a payment to a Non-U.S. holder will be allowed as a refund or a credit
against such Non-U.S. holder&rsquo;s U.S. federal income tax liability, provided that the requisite procedures are followed.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal"><B>The
preceding discussion of certain U.S. federal income tax consequences is intended for general information only and does not constitute
tax advice. Each investor should consult its own tax adviser as to particular tax consequences to it of purchasing, holding and
disposing of the Notes, common stock and Warrants, including the applicability and effect of any state, local or foreign tax laws,
and of any proposed changes in applicable laws.</B></FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-style: normal"><B>&nbsp;</B></FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling
persons in the successful defense of any action, suit or proceeding) is asserted by that director, officer or controlling person
in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether that indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of that issue.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">LEGAL MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The validity of the securities offered hereby
will be passed upon for us by Blank Rome LLP, New York, New York.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">EXPERTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The financial statements for Boomerang Systems,
Inc. as of and for the fiscal years ended September 30, 2011 and 2010 included in this Prospectus have been so included in reliance
on the report of Liebman Goldberg &amp; Hymowitz, LLP, an independent registered public accounting firm, given on the authority
of said firm as experts in auditing and accounting.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">WHERE YOU CAN FIND
MORE INFORMATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange Commission, or &ldquo;SEC.&rdquo;&nbsp;&nbsp;You may read
and copy any documents we file with the SEC at the SEC&rsquo;s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.&nbsp;&nbsp;You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.&nbsp;&nbsp;In addition,
our filings with the SEC are available to the public through the SEC&rsquo;s Internet site at http://www.sec.gov.&nbsp;&nbsp;Information
about us is also available on our website at http://www.boomerangsystems.com.&nbsp;&nbsp;This URL and the SEC&rsquo;s URL above
are intended to be inactive textual references only.&nbsp;&nbsp;The information on the SEC&rsquo;s website and our website is not
part of, and is not incorporated into, this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have filed a registration statement covering
our units subject to this offering, of which this prospectus forms a part.&nbsp;&nbsp;This prospectus, however, does not contain
all of the information set forth in the registration statement and the exhibits to the registration statement.&nbsp;&nbsp;For further
information concerning us and the securities we may offer and sell, you should read the entire registration statement and the exhibits
to the registration statement. The registration statement has been filed electronically and may be obtained in any manner listed
above.&nbsp;&nbsp;Any statements contained in this prospectus concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as an exhibit to the registration statement or otherwise
filed with the SEC.&nbsp;&nbsp;Each such statement is qualified in its entirety by such reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 94%; padding-left: 13.5pt; text-indent: -13.5pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 6%; text-decoration: none; text-align: center; border-bottom: Black 1pt solid">Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 13.5pt; text-indent: -13.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="text-align: center">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated Balance Sheets as of September 30, 2011 and 2010</TD>
    <TD STYLE="text-align: center">F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in">Consolidated Statements of Operations for the years ended September 30, 2011 and 2010</TD>
    <TD STYLE="text-align: center">F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in">Consolidated Statements of Stockholders&rsquo; Equity (Deficit) for the years ended September 30, 2011 and 2010</TD>
    <TD STYLE="text-align: center">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.1in; text-indent: -0.1in">Consolidated Statements of Cash Flows for the years ended September 30, 2011 and 2010</TD>
    <TD STYLE="text-align: center">F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Notes to Consolidated Financial Statements</TD>
    <TD STYLE="text-align: center">F-7</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated Balance Sheets as of September 30, 2011 and June 30, 2012</TD>
    <TD STYLE="text-align: center">F-25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated Statement of Operations for the nine months ended June 30, 2012 and 2011</TD>
    <TD STYLE="text-align: center">F-26</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated States of Cash Flows for the nine months ended June 30, 2012 and 2011</TD>
    <TD STYLE="text-align: center">F-27</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Notes to Unaudited Consolidated Financial Statements for the nine months ended June 30, 2012</TD>
    <TD STYLE="text-align: center">F-28</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&#160;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To The Audit Committee</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Boomerang Systems, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Florham Park, New Jersey</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have audited the accompanying consolidated balance sheets
of Boomerang Systems, Inc. and Subsidiaries as of September 30, 2011 and 2010, and the related consolidated statements of operations,
stockholders&rsquo; deficit and cash flows for each of the years in the two year period ended September 30, 2011.&nbsp;&nbsp;The
Company&rsquo;s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 consolidated 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&rsquo;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 consolidated financial statements. An audit also includes assessing &nbsp; the accounting principles
used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Boomerang Systems, Inc. and Subsidiaries as of September
30, 2011 and 2010, and the results of its operations and cash flows for each of the years in the two year period ended September
30, 2011, in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ Liebman Goldberg &amp; Hymowitz, LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Liebman Goldberg &amp; Hymowitz, LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Garden City, New York</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">January 9, 2012&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">CONSOLIDATED BALANCE SHEETS</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">September 30,</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">September 30,</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">ASSETS</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">65,590</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,284,362</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">411,336</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">235,605</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Note receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,710</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">202,189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">265,761</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,993</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,882</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Costs in excess of billings</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">521,213</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,238,321</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,835,320</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Property, plant and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,874,678</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,295,388</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Other assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Note receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,748</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,835</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Investment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">139,836</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">45,460</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Total other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">156,584</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61,295</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,269,583</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,192,003</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Current liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,635,353</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,412,081</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Due to related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,867</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Deposit payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">154,403</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">219,403</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 0.12in">Billings in excesss of costs and estimated earned profits on uncompleted contracts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,186</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Estimated loss on uncompleted contract</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">188,484</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Debt- current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">110,780</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">506,908</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Debt- current portion - related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">546,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,089,020</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,803,445</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Long term liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Debt- long term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,807,869</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,111</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Debt- long term - related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,425,334</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Total long term liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,233,203</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,111</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,322,223</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,841,556</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Stockholders' (deficit) equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 0.12in">Preferred stock, $0.01 par value; authorized shares 1,000,000; 0 shares issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.12in; padding-left: 0.24in">Common stock, $0.001 par value; authorized shares 400,000,000 and 200,000,000; 7,277,192 and 7,021,404 issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,277</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,021</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,752,581</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,053,920</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Accumulated (deficit)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(52,812,498</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(33,710,494</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Total stockholders' (deficit) equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,052,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,350,447</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total liabilities and stockholders' (deficit) equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,269,583</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,192,003</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0 0pt 9pt; font: 10pt Times New Roman, Times, Serif">Note: Common Stock
and Additional paid in capital at September 30, 2010 have been presented to reflect the effect of the one-for-twenty reverse stock
split of the Company's common stock effected on June 20, 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">See accompanying notes.</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin: 0pt 0"></P>

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<P STYLE="margin: 0pt 0">&#160;&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">CONSOLIDATED STATEMENTS
OF OPERATIONS</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">FOR THE YEARS ENDED SEPTEMBER
30, 2011 and 2010</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Revenues:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left; padding-bottom: 1pt; text-indent: 0pt">System sales</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">1,591,948</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">718,530</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Total revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,591,948</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">718,530</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Cost of Goods Sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,241,531</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">715,135</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Gross (Loss) Profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,649,583</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,395</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Expenses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Sales and marketing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,176,724</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,144,513</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,003,046</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,652,419</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Research and development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,202,020</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,669,331</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Depreciation and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">52,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49,089</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 36pt">Total expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,433,796</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,515,352</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Loss from operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,083,379</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,511,957</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Other income (expenses):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,796</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,977</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(113,657</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(168,408</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,899,866</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Miscellaneous Income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">173,163</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Loss on disposal of equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,893</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Loss on equity investment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(153,019</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(108,785</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 36pt">Total other income (expenses)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,993,476</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(271,216</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Loss before provision for income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(19,076,855</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15,783,173</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Provision for income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,149</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,386</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(19,102,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(15,789,559</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Net loss per common share - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.68</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3.18</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Weighted average number of shares - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,117,078</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,960,954</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0 0pt 9pt; font: 10pt Times New Roman, Times, Serif">Note:&#160;&#160;The
weighted average number of shares, basic and diluted, for the twelve months&#160;ended September 30, 2010 have been presented to
reflect the effect of the one-for-twenty reverse stock split of the Company's common stock effected on June 20, 2011.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0 0pt 9pt">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">See accompanying notes.</P>

<P STYLE="margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0"></P>

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<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">BOOMERANG SYSTEMS INC. AND SUBSIDIARIES</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY (DEFICIT)</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Additional</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Preferred Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Paid in</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Accumulated</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 37%; text-align: left; text-indent: 0pt">Balance as of September 30, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">3,059,681</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">3,060</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">14,731,868</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">(17,920,935</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; text-align: right">(3,186,007</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Options for Services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">503,817</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">503,817</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Convert the August 2008 12% Promissory Notes to Common Stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,003</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,677,199</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,678,038</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">695,288</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">695</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,389,880</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,390,575</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of October &amp; November 2009 Post-Maturity Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,619</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,619</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Options- Directors</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,609,974</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,609,974</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants- Directors</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">901,316</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">901,316</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- Convertible Note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231,827</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">463,422</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">463,654</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- March 2010 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">299,940</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- April 2010 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99,980</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- June 2010 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">299,940</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- Compensation for Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">140,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">140</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">699,860</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants- Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">699,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">699,998</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- Conversion of Debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">465,605</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,327,557</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,328,022</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- July 2010 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,998,600</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock- Patterson Investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,950</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,789,559</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,789,559</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Balance as of September 30, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,021,404</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7,021</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">37,053,920</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(33,710,494</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,350,447</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Options for Services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">723,637</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">723,637</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Options - Officers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,249,997</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,249,997</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants - Consultant</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants - Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,202,406</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,202,406</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants - Line of Credit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">974,985</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">974,985</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Warrants - Line of Credit Draw</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,924,881</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,924,881</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock - Conversion of Debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">79,602</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">80</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">397,932</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">398,012</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock - November 2010 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,329</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">199,966</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">199,999</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Issuance of Common Stock - February 2011 Private Placement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">142,857</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">999,857</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Net Loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(19,102,004</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(19,102,004</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Balance as of September 30, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,277,192</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,277</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">48,752,581</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(52,812,498</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,052,640</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0 0pt 9pt; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0 0pt 9pt; font: 10pt Times New Roman, Times, Serif">Note: The Stockholder's
Equity (Deficit) Statement has been presented to reflect the effect of the one-for-twenty reverse stock split of the Company's
common stock effected on June 20, 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">See accompanying notes.</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 107; Value: 1 -->
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    <!-- Field: /Page -->
<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">CONSOLIDATED STATEMENTS
OF CASH FLOWS</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">FOR THE YEARS ENDED SEPTEMBER
30, 2011 AND 2010</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">CASH FLOWS FROM OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(19,102,004</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(15,789,559</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52,006</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49,089</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Loss on disposal of equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,893</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Grant of options for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,973,634</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,113,790</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Issuance of common stock for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Issuance of warrants for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,227,406</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,601,314</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Issuance of warrants for financing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,899,866</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Loss on equity investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">153,019</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">108,785</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Post-Maturity Warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,619</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Changes in assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase) in accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(175,731</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(198,605</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase)/ decrease in notes receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,710</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,710</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase) in notes receivable (non-current)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(913</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase) in costs in excess of billings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(521,213</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase)/decrease in inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63,572</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(84,871</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">(Increase)/decrease in prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,889</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,977</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Increase in accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">223,273</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,025,860</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Increase in due to related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">283,466</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">274,298</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Increase/ (decrease) in deposit payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(65,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.12in; padding-left: 0.24in">Increase/ (decrease) in billings in excess of costs and estimated earned profits on uncompleted contracts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(48,186</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,186</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Increase in estimated loss on uncompleted contract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">188,484</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">NET CASH USED IN OPERATING ACTIVITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,834,829</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,873,781</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">CASH FLOWS FROM INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Purchase of property, plant and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,633,189</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,081,225</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Additional equity investment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(247,395</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(133,825</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">NET CASH USED IN INVESTING ACTIVITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,880,584</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,215,050</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Proceeds from loans payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,725,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,120,859</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 9pt">Repayment of loans payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(428,358</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,120,402</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 9pt">Proceeds from private placement- common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,199,999</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,340,576</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">NET CASH PROVIDED BY FINANCING ACTIVITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,496,641</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,341,033</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">DECREASE IN CASH AND CASH EQUIVALENTS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,218,772</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,252,202</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">CASH AND CASH EQUIVALENTS - beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,284,362</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,032,160</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">CASH AND CASH EQUIVALENTS- end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">65,590</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,284,362</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">SUPPLEMENTAL DISCLOSURE OF CASH FLOW&nbsp;&nbsp;INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Cash paid for:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt; padding-left: 9pt">Interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,523</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">14,034</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt; padding-left: 9pt">Income taxes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,149</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Non-cash investing and financing activites:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt; padding-left: 9pt">Conversion of promissory notes and accrued interest into common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,141,692</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt; padding-left: 9pt">Conversion of debt and accrued interest into common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">398,012</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,328,023</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: center; text-indent: 0pt; margin: 0pt 0">See accompanying notes.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 1 &#8211; ORGANIZATION
AND NATURE OF OPERATIONS</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal"><I>The
Company</I></FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company, through its
wholly owned subsidiary, Boomerang Utah, is engaged in the design, development, and marketing of automated storage and retrieval
systems for automobile parking and containerized self-storage units. The Company was a developmental stage company through the
first quarter of fiscal 2008.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Unless the context otherwise
requires, the terms &#8220;Company,&#8221; &#8220;we,&#8221; &#8220;our,&#8221; and &#8220;us,&#8221; means Boomerang Systems,
Inc. and its consolidated subsidiaries.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On June 20, 2011, an amendment
to the Company&#8217;s Certificate of Incorporation was filed, effecting a one-for-twenty reverse split (the &#8220;Reverse Split&#8221;)
of Boomerang&#8217;s common stock.&#160;&#160;The par value of the Company&#8217;s common stock remained $0.001 per share and the
number of shares of common stock authorized to be issued remained at 400,000,000.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">All share numbers in the
financial statements give effect to the Reverse Split.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 2 &#8211; SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Principles of Consolidation</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Research and Development</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Pursuant to ASC 730, research
and development costs are expensed as incurred.&#160;&#160;Research and development costs for the years ended September 30, 2011
and 2010 were $2,202,020 and $2,669,331, respectively.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Earnings Per Common Share</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">We adopted ASC 260. The
statement established standards for computing and presenting earnings per share (&#8220;EPS&#8221;). 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 years ended September 30, 2011 and September 30, 2010 was 7,117,078 and 4,960,954, respectively.&#160;&#160;The Company&#8217;s
common stock equivalents, of outstanding options and warrants, have not been included as to include them would be anti-dilutive.
As of September 30, 2011 and 2010, there were fully vested options outstanding for the purchase of 597,165 and 361,884 common shares
and warrants for the purchase of 4,196,184 and 2,458,232 common shares, respectively, both of which could potentially dilute future
earnings per share.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Revenue Recognition</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Revenues from the sales
of&#160;&#160;RoboticValet&#8482; and rack and rail systems will be recognized using the percentage of completion method, whereby
revenue and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total
estimated project costs at completion.</P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 2 &#8211; SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Project costs generally
include all material and shipping costs, our direct labor, subcontractor costs and an allocation of indirect costs related to the
direct labor. Changes in the project scope, site conditions, staff performance and delays or problems with the equipment used on
the project can result in increased costs that may not be billable or accepted by the customer and a loss or lower profit from
what was originally anticipated at the time of the proposal.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Estimates for the costs
to complete the project are periodically updated by management during the performance of the project. Provisions for changes in
estimated costs and losses, if any, on uncompleted projects are made in the period in which such losses are determined.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">When the current estimate
of total contract costs exceeds the current estimate of total contract revenues, a provision for the entire loss on the contract
is made.&#160; Losses are recognized in the period in which they become evident under the percentage-of-completion method.&#160;
The loss is computed on the basis of the total estimated costs to complete the contract, including the contract costs incurred
to date plus the estimated costs to complete.&#160; As of September 30, 2011, it was estimated that the gross loss on current contracts
would be $1,772,262.&#160;&#160;This loss is comprised of $1,583,778 recognized through the percentage of completion method for
the year ended September 30, 2011, and $188,484 as a provision for the remaining losses on contracts.&#160;&#160;In addition, the
$3,395 of gross profit recognized at September 30, 2010 was reversed out during the year ended September 30, 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Revenues of $1,591,948 and
$718,530 have been recognized for the years ended September 30, 2011 and 2010, respectively, under the percentage of completion
method.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company may have service
contracts in the future after the contract warranty period is expired, which are separate and distinct agreements from project
agreements and will be billed according to the terms of the contract.&#160;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Cash and Equivalents</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Accounts Receivable and
Allowance for Doubtful Accounts</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.&#160;&#160;We consider our accounts receivables to be
favorably collectible.&#160;&#160;Accordingly, we have not recorded an allowance for doubtful accounts at September 30, 2011 and
2010, respectively.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Investment at Equity</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company accounts for
the equity investment using the equity method unless its value has been determined to be other than temporarily impaired, in which
case we write the investment down to its impaired value. The Company reviews this investment periodically for impairment and makes
appropriate reductions in carrying value when other-than-temporary decline is evident; however, for non-marketable equity securities,
the impairment analysis requires significant judgment. During its review, the Company evaluates the financial condition of the
issuer, market conditions, and other factors providing an indication of the fair value of the investment. Adverse changes in market
conditions or operating results of the issuer that differ from expectation could result in additional other-than-temporary losses
in future periods.&#160;&#160;See Note 4.</P>

<P STYLE="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 2 &#8211; SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Inventory</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Property, Plant and Equipment</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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 fifteen
years. Depreciation and amortization for the years ended September 30, 2011 and September 30, 2010 was $52,006 and $49,089, respectively.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>&#160;</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Income Taxes</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">We account for income taxes
under ASC 740-10. 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.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Use of Estimates</I></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Management of the Company
has made estimates and assumptions relating to the 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.&#160;&#160;Actual results could differ from these estimates.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Impairment of Long-Lived
Assets</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Fair Value of Financial
Instruments</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company has adopted
the required provisions of Topic 820, &#8220;Fair Value Measurements&#8221;. 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.&#160;Observable
market data should be used when available.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 2 &#8211; SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company&#8217;s financial
instruments are carried at fair value, including, cash equivalents. Virtually all of the Company&#8217;s valuation measurements
are Level 1 measurements. The adoption of Topic 820 did not have a significant impact on the Company&#8217;s consolidated financial
statements.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Warranty Reserves</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company provides warranty
coverage on its products for a specified time as stipulated in its sales contracts.&#160; At the time of completion of a project
the Company will record a warranty reserve for estimated costs in connection with future warranty claims.&#160; The amount of warranty
reserve is based primarily on the estimated number of products under warranty and historical costs to service warranty claims.&#160;
Management periodically assesses the adequacy of the reserves based on these factors and adjusts the reserve accordingly.&#160;
The Company has incurred warranty expense of $0 and $8,162 in fiscal years 2011 and 2010, respectively, relating to its completed
projects.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Advertising Expense</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Advertising costs amounted
to $242,717 and $190,326 for the years ended September 30, 2011 and 2010<I>, </I>respectively, and are included in Sales and Marketing.
Advertising costs are expensed as incurred.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Stock-Based Compensation</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The analysis and computation
was performed based on our adoption of ASC 718-10-25, which requires the recognition of the fair value of stock-based compensation.&#160;&#160;For
the fiscal years ended September 30, 2011 and 2010, we conducted an outside independent analysis and our own review, and based
on the results, we recognized $723,637 and $487,616 in share-based payments related to non-vested stock options that were issued
from fiscal year 2008 through 2010, and $1,249,997 and $5,626,174 for fully vested options issued during the year ended September
30, 2011 and 2010, respectively.&#160;&#160;We also recognized $8,127,272 and $1,601,314 for the issuance of warrants, of which
$4,202,406 and $699,998 was for warrants issued to the Chief Executive Officer of the Company in connection with his employment
agreement, $25,000 and $0 issued to a consultant for services and $3,899,866 and $0 issued related to financing costs during the
year ended September 30, 2011 and 2010, respectively.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>&#160;</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Reclassification</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Certain fiscal year ended
September 30, 2010 items have been reclassified to conform with the fiscal year ended September 30, 2011 presentation.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>Recent Accounting Pronouncements</B></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In May 2011, the FASB issued
ASU No. 2011-04, &#8220;Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.&#8221;&#160;&#160;The
amendments in this ASU are effective during interim and annual periods beginning after December 15, 2011.&#160;&#160;The adoption
of this ASU is not expected to have a material impact on the consolidated financial statements.</P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In June 2011, the FASB issued
ASU No. 2011-05, &#8220;Presentation of Comprehensive Income.&#8221; Under the amendments in this ASU, an entity has two options
for presenting its total comprehensive income: to present total comprehensive income and its components along with the components
of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required
to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December
15, 2011, with early adoption permitted. The adoption of ASU No. 2011-05 will not have any material impact on the Company&#8217;s
consolidated financial position and results of operations.</P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 2 &#8211; SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In September 2011, the FASB
issued Accounting Standards Update (&#8220;ASU&#8221;) No. 2011-08, Intangibles &#8212; Goodwill and Other (Topic 350). This Accounting
Standards Update amends FASB ASC Topic 350. This amendment specifies the change in method for determining the potential impairment
of goodwill. It includes examples of circumstances and events that the entity should consider in evaluating whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption does not have
any material impact on the Company&#8217;s consolidated financial position and results of operations.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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 the consolidated financial statements of the Company.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 3 - NOTE RECEIVABLE</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On January 6, 2010, the
Company converted a $26,000 accounts receivable balance from a customer into a note receivable bearing interest at an annual rate
of 6%.&#160;&#160;Monthly payments of $2,167 plus interest started February 1, 2010.&#160;&#160;The amount outstanding at September
30, 2010 was $8,710.&#160;&#160;This receivable was paid in full as of January 2011.&#160;&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 4 &#8211; INVESTMENT
AT EQUITY</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company made an initial
capital investment of $20,420 in the United Arab Emirates &#8220;UAE&#8221; joint venture, Boomerang Systems Middle East, LLC in
fiscal year 2009.&#160;&#160;This investment was part of the application process to obtain a commercial license in the UAE.&#160;&#160;This
license was granted on October 26, 2009.&#160;&#160;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.&#160;&#160;The equity
method is used to calculate the current amount of this investment.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">During the fiscal year
ended September 30, 2011, the Company made additional investments in the UAE joint venture of $247,395.&#160;&#160;Based on the
equity method, the 49% loss we have recognized on this investment for the year ended September 30, 2011 was $153,019.&#160;&#160;After
factoring in the loss, our carrying value on this investment was $139,836 at September 30, 2011.</P>

<P STYLE="text-align: justify; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; text-align: left; text-indent: 0pt">Balance as of September 30, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">20,420</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Additional investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,825</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Loss on investment (40%)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(108,785</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Balance as of September 30, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">45,460</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Additional investment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">247,395</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Loss on investment (49%)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(153,019</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Balance as of September 30, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">139,836</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 5 &#8211; INVENTORY</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The components of inventory
as of September 30, 2011 and 2010 were:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; padding-bottom: 1pt; text-indent: 0pt">Parts, materials and assemblies</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">202,189</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">265,761</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total Inventory</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">202,189</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">265,761</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: left; margin-top: 0pt; font: 10pt Times New Roman, Times, Serif; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0"><B>&#160;</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 6 &#8211; PROPERTY,
PLANT AND EQUIPMENT</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Property and equipment are
stated at cost. Maintenance and repairs are charged to expense as incurred.&#160; Costs of major additions and betterments are
capitalized.&#160; Depreciation is calculated on the straight-line method over the estimated useful lives of the respective assets.&#160;
Depreciation and amortization for the years ended September 30, 2011 and 2010 were $52,006 and $49,089, respectively.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Property, plant and equipment
consist of the following at September 30, 2011 and 2010:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Computer equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">242,149</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">138,823</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Machinery and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,855</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,855</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Furniture and fixtures</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,856</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">34,720</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Leasehold improvements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">62,469</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">62,469</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Construction in progress (1)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,595,765</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,072,668</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,033,094</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,405,535</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left; padding-bottom: 1pt; text-indent: 0pt">Less: Accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(158,416</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(110,147</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,874,678</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,295,388</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">(1) All construction in
progress at September 30, 2011, was for the demonstration facility at Crystal Springs Resort which was completed in October 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 7 &#8211; BILLINGS
IN EXCESS OF COSTS/COSTS IN EXCESS OF BILLINGS</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company entered into
a contract in 2010 for the construction of a rack and rail-based parking system and is recognizing revenue on the percentage of
completion method.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Information with respect
to uncompleted contracts at September 30, 2011 and September 30, 2010 are as follows:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Earnings on work in progress</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,105,478</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">718,530</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Less: Billings</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,584,265</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">766,716</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Costs in excess of billings/(Billings in excess of costs)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">521,213</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(48,186</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 8 &#8211; ACCOUNTS
PAYABLE AND ACCRUED EXPENSES:</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Accounts payable and other
liabilities at September 30, 2011 and 2010 consist of the following:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Accounts payable &ndash; trade</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,340,114</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">889,724</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Accrued interest</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">105,721</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,258</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Accrued&nbsp;&nbsp;taxes under employment agreement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">315,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Accrued payroll</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">122,715</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99,714</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Other accrued expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">66,803</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">91,385</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,635,353</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,412,081</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 9 &#8211; INCOME
TAXES</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The tax expense (benefit)
for the years ended September 30, 2011 and 2010 consists of the following components:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Current</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Federal</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; padding-bottom: 1pt; text-indent: 0pt">State</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">25,149</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">6,386</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,149</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,386</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Deferred</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Federal</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">State</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,149</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The reconciliation between
the actual and expected federal tax is as follows:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2010</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Federal corporate tax rate of 34% and applicable AMT applied to pretax loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">State and local taxes, net of federal benefit</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">25,149</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">6,386</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Effect of non-deductible entertainment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Effect of tax vs. book depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Effect of capital loss carry forward</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Effect of NOL limitation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total tax expense (benefit)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,149</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Deferred income taxes consist
of the following at September 30, 2011 and 2010:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2010</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Deferred tax assets</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,590,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,429,640</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Deferred tax liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Valuation allowance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,590,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,429,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">As of September 30, 2011, the Company had
net operating losses (&#8220;NOLs&#8221;) of approximately $13,500,000 and for September 30, 2010, it had NOLs of approximately
$7,146,000.&#160;&#160;These amounts are available to be carried forward to offset future taxable income. The carry forwards begin
to expire during the year ended September 30, 2027. The Company has provided a full 100% valuation allowance on the deferred tax
assets at September 30, 2011 and 2010 to reduce such deferred income tax assets to zero as it is management&#8217;s belief that
realization of such amounts do not meet the criteria required by generally accepted accounting principles.&#160;&#160;Management
will review the valuation allowance required periodically and make adjustments if warranted.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">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. 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.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 10 &#8211;DEBT</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company entered into
a sixty month equipment lease with a third party commencing in December 2007.&#160;&#160;The total principal balance of this lease
was $135,675 at an annual rate of 6.45%.&#160;&#160;&#160;At September 30, 2011, the outstanding principal balance was $38,111,
of which $30,242 was classified as current debt.&#160;&#160;The remaining $7,869 was classified as long-term debt.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Effective February 6, 2008,
subsequent to the reverse merger, the Company was indebted for an unsecured loan to a third party.&#160;&#160;As of September 30,
2010, the principal balance of this loan was $80,538.&#160;&#160;The loan is not collateralized, bears interest at an annual rate
of 10% and is due on demand.&#160;&#160;As of September 30, 2011, the balance of the loan including accrued interest was $88,971.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In November 2010, the Company
converted a third party loan of $398,012, including accrued interest, that was due to mature on December 31, 2010 and had an interest
rate of 12%, into 79,603 shares of the Company&#8217;s common stock, $0.001 par value and an equal number of five-year warrants,
each to purchase a share of the Company&#8217;s common stock with an exercise price of $5.00 per share.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Between December 23 and
December 29, 2010, the Company obtained commitments&#160;for a line of credit for an aggregate of $3,250,000 provided by nine accredited
investors, including four related parties in the amount of $1,750,000, pursuant to the terms of a commitment letter entered into
between these lenders and the Company.&#160;&#160;Upon each draw down on the line of credit, each lender received a note for the
amount borrowed, bearing interest from the date of the borrowing thereunder at a rate of 3% per annum.&#160;&#160;Under the terms
of the commitment letter, each lender received one five-year warrant to purchase one share of the Company&#8217;s common stock
for every dollar that lender committed under the line of credit, with an exercise price of $6.00 per share.&#160;&#160;In addition,
upon each draw down on the line of credit, each lender received additional warrants at a rate of three warrants for each dollar
drawn down from that lender's commitment, with the amount of the draw down attributable to each investor&#8217;s commitment to
be determined on a pro rata basis.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In February and March 2011,
the Company drew down a total of $2,166,664 on this line of credit of $3,250,000.&#160;&#160;In connection with the draw down,
the Company issued notes in an aggregate amount of $2,166,664, bearing interest of 3% per annum to a total of nine investors, including
$1,166,666 to four related parties.&#160;&#160;In addition, in connection with the draw down, five-year warrants were issued to
purchase 325,000 shares of common stock at an exercise price of $6.00 per share, including a total of 175,000 warrants issued to
four related parties.&#160;&#160;In May 2011, the Company drew down the remaining $1,083,336 on this line of credit.&#160;&#160;In
connection with the draw down, the Company issued notes in an aggregate amount of $1,083,336, bearing interest of 3% per annum
to a total of nine investors, including $583,334 to four related parties.&#160;&#160;In addition, in connection with the draw down,
five-year warrants were issued to purchase 162,500 shares of common stock at an exercise price of $6.00 per share, including a
total of 87,500 warrants issued to four related parties.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On June 30, 2011, the Company
entered into a bank line of credit for up to $1,000,000.&#160;&#160;During the fiscal year ended September 30, 2011, the Company
drew down the entire balance of the line of credit.&#160;&#160;This line of credit bore interest of 3.25% per annum and was due
on October 29, 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On August 4, 2011, the
Company entered into a 5% bank Promissory Note a principal amount of $300,000.&#160;&#160;The maturity date of this note was October
4, 2011.</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 10 &#8211;DEBT (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In May 2010, the Company
entered into a 6% line of credit with Sail Energy, a company owned by Gail Mulvihill, a principal shareholder of the Company and
the mother of the Company&#8217;s President, Christopher Mulvihill, for up to $1,300,000.&#160;&#160;In May 2011, the outstanding
principal balance was $273,000 and it was agreed between the Company and Sail Energy that there would be no additional borrowing
under this line of credit.&#160;&#160;As of September 30, 2011, the outstanding principal balance of this loan was $273,000, which
was due on December 31, 2011.&#160;&#160;The total amount outstanding under this loan, including accrued interest, as of September
30, 2011 was $300,142.&#160;&#160;The loan was convertible into shares of the Company&#8217;s common stock and warrants to purchase
shares of common stock at a conversion rate of $5.00 for one share of our common stock and one five-year warrant to purchase one
additional share with an exercise price of $5.00 per share.&#160;&#160;<B>&#160;</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In July 2010, the Company
entered into a 6% Convertible Promissory Note with Venturetek, LP, a principal stockholder of the Company, with a principal amount
of $273,000 which is due on December 31, 2011.&#160;&#160;The total amount outstanding under this note, including accrued interest,
as of September 30, 2011 was $292,461.&#160;&#160;The note, together with accrued but unpaid interest, was convertible into shares
of the Company&#8217;s common stock and warrants to purchase shares of common stock at a rate of $5.00 for a unit consisting of
one share of our common stock and one five-year warrant to purchase one additional share at an exercise price of $5.00 per share.&#160;&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On September 30, 2011, the
Company owed an aggregate of $220,763 to SB&amp;G Properties for deferred rental payments.&#160;&#160;This deferred rent was converted
to a long-term note on November 1, 2011.&#160;&#160;See Note 12 &#8211; Related Parties.&#160;&#160;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On September 30, 2011, the
Company owed an aggregate of $133,571 to Stan Checketts Properties for deferred rental payments.&#160;&#160;This deferred rent
was converted to a long-term note on November 1, 2011.&#160;&#160;See Note 12 &#8211; Related Parties.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In September 2011, Atlantic
and Madison of NJ Corp, a company owned by Gail Mulvihill, loaned the Company $775,000, with the understanding that upon finalization
of the documents related to a private placement offering by the Company, these loans will be considered an investment in such private
placement.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; text-indent: 0pt">Principal</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; text-indent: 0pt">As of</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; font-weight: bold; text-indent: 0pt">Current Debt- Third Party:</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">9/30/2011</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">9/30/2010</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">Maturity&#160;Date</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">Interest Rate</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">Secured</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; width: 35%; text-indent: 0pt">&#160;&#160;Loan Payable- Third Party</TD>
    <TD STYLE="text-align: right; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 11%; text-align: right">80,538</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 11%; text-align: right">80,538</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: center; text-indent: 0pt">Upon&#160;Demand</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">10</TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left">%</TD>
    <TD STYLE="width: 11%; text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable- Third Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">398,012</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">12/31/2010</TD>
    <TD STYLE="text-align: right">(1</TD>
    <TD NOWRAP STYLE="text-align: left">)&#160;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">12</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">&#160;&#160;Lease Payable- Bank (current portion)</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">30,242</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">28,358</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">9/30/2011</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">6.45</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">%</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">Yes</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; font-weight: bold; text-indent: 0pt">Total Current Debt- Third Party</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">110,780</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">506,908</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; font-weight: bold; text-indent: 0pt">Current Debt &#8211; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable &#8211; Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">273,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">&#160;&#160;Loan Payable &#8211; Related Party</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">273,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">(2</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">6</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">%</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; font-weight: bold; text-indent: 0pt">Total Current Debt &#8211; Related Party</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">546,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; font-weight: bold; text-indent: 0pt">Long-Term Debt &#8211; Third Party:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Promissory Notes &#8211; Line of Credit</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,500,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Line of Credit - Bank</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,000,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Promissory Note &#8211; Bank</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">300,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">&#160;&#160;Lease Payable- Bank</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,869</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,111</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">12/31/2012</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">6.45</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">%</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">Yes</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; font-weight: bold; text-indent: 0pt">Total Long-Term Debt &#8211; Third Party</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,807,869</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,111</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; font-weight: bold; text-indent: 0pt">Long-Term Debt- Related Party:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable- Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">273,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable- Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">273,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable &#8211; Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">220,763</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable &#8211; Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">133,571</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">&#160;&#160;Loan Payable &#8211; Related Party</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">775,000</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="text-align: right">(2</TD>
    <TD NOWRAP STYLE="text-align: left">)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD NOWRAP STYLE="text-align: left">%</TD>
    <TD STYLE="text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">&#160;&#160;Promissory Notes &#8211; Line of Credit</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,750,000</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">11/1/2016</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">(2</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">6</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left">%</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center; text-indent: 0pt">No</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; font-weight: bold; text-indent: 0pt">Total Long-Term Debt- Related Party</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,425,334</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; font-size: 10pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right; width: 36pt">(1)&#160;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">This note was converted into common stock and warrants during the quarter ended 12/31/2010. See Note 8.</TD></TR>
</TABLE>
<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; font-size: 10pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right; width: 36pt">(2)&#160;&#160;</TD>
    <TD STYLE="text-align: justify; text-indent: 0pt">This debt was reclassified from current to long-term pursuant to ASC 470-10-45-14.&#160;&#160;On November 1, 2011, as part of a private offering described in Note 15 &#8211; Subsequent Events, this debt was refinanced to a long-term note.</TD></TR>
</TABLE>
<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 10 &#8211;DEBT (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Capital&nbsp;lease&nbsp;payable&nbsp;to&nbsp;bank*</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Secured by equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">38,111</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">66,469</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Less: current maturities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(30,242</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(28,358</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total long-term debt</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,869</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,111</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>*payable in monthly&#160;installments
of $2, 651 including interest at 6.448% due December 1, 2012</I></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Aggregate maturities required
on long-term debt at September 30, 2011 is as follows:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="4" STYLE="text-align: center; text-indent: 0pt">Year Ended</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="4" STYLE="border-bottom: Black 1pt solid; text-align: center; text-indent: 0pt">September 30,</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: right; width: 62%; text-indent: 0pt">2012</TD>
    <TD STYLE="text-align: left; width: 3%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 11%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 21%; text-indent: 0pt">30,242</TD>
    <TD STYLE="text-align: left; width: 3%">&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: right; padding-bottom: 1pt; text-indent: 0pt">2013</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid; text-indent: 0pt">7,869</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt">Subtotal</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right; text-indent: 0pt">38,111</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Less current</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid; text-indent: 0pt">(30,242</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">)</TD></TR>
<TR STYLE="background-color: rgb(204,255,204); vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total long-term</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double; text-indent: 0pt">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double; text-indent: 0pt">7,869</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 11 - EQUITY</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Preferred Stock:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company is authorized
to issue 1,000,000 shares of preferred stock, with a par value of $0.01 per share.&#160;&#160;As of September 30, 2011 and 2010,
there were no shares of preferred stock issued and outstanding.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Common Stock:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In September 2010, the Board
of Directors unanimously approved an amendment to the Company&#8217;s Certificate of Incorporation, increasing the Company&#8217;s
authorized shares of common stock from 200,000,000 to 400,000,000, which was approved by the written consent of the holders of
a majority of our issued and outstanding shares of common stock on September 29, 2010. The increase was affected by the filing
of an amendment to our certificate of incorporation with the Secretary of State of Delaware on November 23, 2010.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In November 2010, the holder
of $398,012 of outstanding indebtedness, exchanged its indebtedness for units consisting of shares of the Company&#8217;s common
stock and common stock purchase warrants.&#160;&#160;The exchange was for 79,602 shares of the Company&#8217;s common stock and
an equal number of common stock purchase warrants to purchase shares of common stock, which are exercisable for a period of five
years at an exercise price of $5.00.&#160;&#160;The exchange was at a rate of $5.00 for one share of common stock and one warrant.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In November 2010, the Company
sold 33,329 shares of common stock at $6.00 per share in a private placement for proceeds of approximately $200,000.&#160;&#160;These
investors also received five year warrants to purchase 33,329 shares with an exercise price of $6.00 per share.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On February 11, 2011, the
Company sold 142,857 shares of common stock at $7.00 per share in a private placement for proceeds of $1,000,000.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On June 20, 2011, an amendment
to the Company&#8217;s Certificate of Incorporation was filed, effecting a one-for-twenty reverse split of Boomerang&#8217;s common
stock.&#160;&#160;The par value of the Company&#8217;s common stock will remain $0.001 per share and the number of shares of common
stock authorized to be issued will remain at 400,000,000.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 11 &#8211; EQUITY
(continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Options:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On October 6, 2010, the
Company granted ten-year non-qualified, fully vested options to the Company&#8217;s President, Christopher Mulvihill, to purchase
200,000 shares of common stock exercisable at $5.00 per share.&#160;&#160;The Company has valued and expensed these options at
$1,000,000 for the year ended September 30, 2011, based on the Black-Scholes Model.&#160;&#160;The following weighted assumptions
were used for valuing these options: (i) risk free interest rate of 0.13%, (ii) expected life of 10 years (iii) dividend rate of
0.00% and (iv) expected volatility of 402.2%.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 24, 2010, the
Company granted options to the Company&#8217;s then Chief Operating Officer, to purchase common stock comprised of five-year, non-qualified,
fully vested options to purchase 50,000 shares exercisable at $5.00 per share.&#160;&#160;These options were forfeited in June
2011, three months after his employment ceased.&#160;&#160;Since these options vested immediately, the Company has valued and expensed
these options at $249,997 for the year ended September 30, 2011, based on the Black-Scholes Model.&#160;&#160;The following weighted
assumptions were used for valuing these options: (i) risk free interest rate of 0.13%, (ii) expected life of 5 years (iii) dividend
rate of 0.00% and (iv) expected volatility of 339.29%.</P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company recorded $1,249,997
and $6,113,789 of compensation expense, net of related tax effects, for the options that were granted that vested during the twelve
months ended September 30, 2011 and 2010, respectively, in accordance with ASC 718-10-25. As of September 30, 2011, there is approximately
$539,850 of total unrecognized costs related to unvested stock options granted to employees. These costs are expected to be recognized
over the next two fiscal years.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The volatility assumption
for the period 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. Although stock-based compensation expense, recognized in the accompanying consolidated statement of operations
for the twelve months ended September 30, 2011 and 2010, is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures.&#160;&#160;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.&#160;&#160;Currently the Company has no historical data
to use for estimating forfeitures.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The following table summarizes
option activity for the years ended September 30, 2011 and 2010:</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted&nbsp;Average</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Outstanding as of September 30, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">125,385</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">11,60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">316,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Forfeitures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Outstanding as of September 30, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">441,385</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.80</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Forfeitures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(50,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Outstanding as of September 30, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">641,385</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.82</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 11 &#8211; EQUITY
(continued)</B></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The following table summarizes
information about stock options outstanding and exercisable as of September 30, 2011 and 2010:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; font-size: 10pt">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; text-indent: 0pt"><FONT STYLE="font-size: 8pt">Period</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Range&#160;of</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Exercise</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Price</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Number</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Outstanding</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Weighted</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Average</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Remaining&#160;Life&#160;in</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Years</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Weighted&#160;Average</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Exercise&#160;Price</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Number</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Exercisable</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Weighted</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Average&#160;Exercise</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Price&#160;Exercisable</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Options</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Weighted&#160;Average</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Remaining&#160;Life&#160;in</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Years&#160;Exercisable</FONT></P>
        <P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">Options</FONT></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: #ccffcc; vertical-align: bottom">
    <TD STYLE="text-align: left; width: 16%; text-indent: 0pt"><FONT STYLE="font-size: 8pt">9/30/2011</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">2.00-18.00</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">641,385</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">7.56</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">4.82</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><P STYLE="margin: 0pt 0"><FONT STYLE="font-size: 8pt">597,635</FONT></P></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">5.02</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 8pt">7.91</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: white; vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: #ccffcc; vertical-align: bottom">
    <TD STYLE="text-align: left; text-indent: 0pt"><FONT STYLE="font-size: 8pt">9/30/2010</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD NOWRAP STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2.00-18.00</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">441,385</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">7.88</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">4.80</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">361,885</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">5.20</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">8.80</FONT></TD>
    <TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Warrants:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On October 1, 2010, the
Company entered into an amended and restated employment agreement with our Chief Executive Officer, Mark Patterson.&#160;&#160;The
amended agreement provides for a base salary of $200,000 per year and provides for a grant of an aggregate of 1,080,000 five-year
warrants with an exercise price of $5.00 per share that vest and become exercisable as follows: (i) 270,000 on October 1, 2010,
(ii) 210,000 on each of February 1, August 1, 2011 and February 1, 2012, and (iii) 180,000 on August 1, 2012.&#160; The amended
agreement provides Mr. Patterson with a right of first refusal, pursuant to which Mr. Patterson has the right, but not the obligation,
to maintain his then pro rata share of the Company&#8217;s issued and outstanding shares and warrants by purchasing additional
shares and warrants each time the Company offers shares and/or warrants for sale.&#160;&#160;The Company has valued and expensed
a total of 690,000 vested warrants at $3,502,418 during the year ended September 30, 2011, based on the Black-Scholes Model.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 12, 2010, the
Company issued five-year warrants to our Chief Executive Officer, Mark Patterson, in connection with the amendment and termination
of his prior employment agreement, to purchase 280,000 shares of the Company&#8217;s common stock at an exercise price of $5.00
per share.&#160;&#160;These warrants were issued in conjunction with an amendment to the Executive employment agreement entered
into with Mr. Patterson in June 2010.&#160;&#160;Using the Black-Scholes Model, the Company has valued these warrants at approximately
$1,399,985, of which $699,998 was expensed during the fiscal year ended September 30, 2010 and the remaining $699,987 was expensed
during the year ended September 30, 2011.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 30, 2010, the
Company granted options to a consultant to purchase up to 5,000 shares of the Company&#8217;s common stock at an exercise price
of $5.00 per share.&#160;&#160;These options vest immediately and shall expire after a period of 5 years.&#160;&#160;The Company
has valued and expensed these warrants at approximately $25,000 during the year ended September 30, 2011, based on the Black-Scholes
Model.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Between December 23 and
December 29, 2010, the Company received commitments from nine accredited investors for a line of credit of up to $3,250,000, including
commitments of an aggregate of $1,750,000 by four related parties.&#160;&#160;Each lender received one warrant to purchase one
share of the Company&#8217;s common stock for each dollar that was committed.&#160;&#160;Accordingly, the Company granted an aggregate
of 162,500 five year warrants at an exercise price of $6.00 per share to these lenders, 87,500 of which were issued to related
parties.&#160;&#160;Using the Black-Scholes Model, the Company has valued and expensed these warrants at $974,985 during the year
ended September 30, 2011, of which $524,992 pertains to related parties.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In February and March 2011,
in connection with the line of credit draw, five-year warrants were issued to purchase 325,000 shares of common stock at an exercise
price of $6.00 per share, including a total of 175,000 warrants issued to four related parties.&#160;&#160;Using the Black-Scholes
Model, the Company has valued and expensed these warrants at $1,949,942 during the year ended September 30, 2011, including $1,049,969
for warrants issued to the four related parties.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0"><B>NOTE 11 &#8211; EQUITY (continued)</B></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In May 2011, in connection
with a draw on the aforementioned line of credit, five-year warrants were issued to purchase 162,500 shares of common stock at
an exercise price of $6.00 per share, including a total of 87,500 warrants issued to four related parties.&#160;&#160;Using the
Black-Scholes Model, the Company has valued and expensed these warrants at $974,939 during the year ended September 30, 2011, including
$524,967 for warrants issued to the four related parties.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">When the above warrants
were granted, the fair value of each warrant granted was estimated on the date of grant using the Black-Scholes valuation model.&#160;&#160;The
following weighted assumptions were used for these warrants granted during the fiscal year ended September 30, 2011: (i) risk free
interest rate of 0.199%, (ii) expected life of five years, (iii) dividend rate of 0.00% and (iv) expected volatility between 357.2
&#8211; 403.1%.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The following table summarizes
warrant activity for the years ended September 30, 2010 and 2009:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted&nbsp;Average</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise&nbsp;Price</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: 0pt">Outstanding as of September 30, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">333,902</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">16.60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,124,350</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">Forfeitures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Outstanding as of September 30, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,458,252</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,737,932</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.95</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt; padding-left: 18pt">Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt; padding-left: 18pt">Forfeitures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">Outstanding as of September 30, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,196,184</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.17</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 12 &#8211; RELATED
PARTY TRANSACTIONS</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">HSK Funding, Inc.,&#160;Lake
Isle Corp.,&#160;and Venturetek, LP, are beneficial holders of shares of our Company&#8217;s common stock and certain of their
members and stockholders are also the members of SB&amp;G Properties, LC. (&#8220;SB&amp;G&#8221;), which is the landlord under
a lease with us.&#160; Gail Mulvihill, the individual who exercises sole voting and investment control over Lake Isle Corp., is
the mother of Christopher Mulvihill, our President, and is a principal stockholder of our Company.&#160;&#160;SB&amp;G entered
into a lease with Boomerang Utah dated October 1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan,
Utah (&#8220;Building A&#8221;).&#160;&#160;The Company assumed this lease in February 2008.&#160;&#160;The initial term of the
lease was for one year with an annual rent of $260,610 plus real property and school taxes. In addition, Boomerang is obligated
to pay for all utilities, repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used
for Boomerang&#8217;s manufacturing activities.&#160;&#160;On March 15, 2010, Boomerang and SB&amp;G agreed to maintain these terms
until September 30, 2011.&#160;&#160;This lease has been extended on a month-to-month basis.&#160;&#160;Deferred rental payments
totaling $220,763 have been accrued as of September 30, 2011 and classified as long-term debt &#8211; related party on our balance
sheet.&#160;&#160;On November 1, 2011, this liability was refinanced as part of the private placement offering described in Note
15 &#8211; Subsequent Events.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Stan Checketts Properties
(&#8220;SCP&#8221;), a company owned by the chief executive officer of Boomerang&#8217;s wholly owned subsidiary, Boomerang Sub,
Inc., entered into a lease with Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan,
Utah.&#160;&#160;The Company assumed this lease in February 2008.&#160;&#160;The initial term of the lease was for one year at
a fixed annual rent of $157,680 plus real property and school taxes. In addition, Boomerang is obligated to pay for all utilities
and for repairs and maintenance to the property.&#160;&#160;The approximately 18,000 square foot leased premises are, in addition
to Building A, also used for Boomerang&#8217;s manufacturing activities.&#160;&#160;We are currently&#160;leasing an additional
2,400 square feet of office and conference room space with Stan Checketts Properties.&#160;&#160;On March 15, 2010, Boomerang and
SCP agreed to maintain these terms until September 30, 2011.&#160;&#160;An amendment was entered into on October 1, 2011, extending
this lease on a month to month basis.&#160;&#160;Deferred rental payments totaling $133,571 have been accrued as of September 30,
2011 and classified as long-term debt &#8211; related party on our balance sheet.&#160;&#160;On November 1, 2011, this liability
was refinanced as part of the private placement offering described in Note 15 &#8211; Subsequent Events.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0"><B>&#160;</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 12 &#8211; RELATED
PARTY TRANSACTIONS (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">SB&amp;G is obligated on
a twenty-year promissory note due August 1, 2027 owing to a non-affiliated bank. The principal amount&#160;due was $773,913 as
of September 30, 2011, and the note bears interest at 3.807% per annum. The promissory note is collateralized by the real property
that is the subject of the lease from SB&amp;G to Boomerang Utah. Boomerang and Messrs. Gene Mulvihill, Stan Checketts, and Burton
Koffman (&#8220;Koffman&#8221;) are the joint and several guarantors of this promissory note.&#160;&#160;Gene Mulvihill is the
husband of Gail Mulvihill and the&#160;father of Christopher Mulvihill, the President of the Company.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Messrs. Gene 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&#8217;
pre-determined fair market value of the equipment at the conclusion of the lease.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company used the services
of Coordinate Services, Inc. for product development.&#160;&#160;The owner of this company is Gene Mulvihill, Jr. who is the brother
of Christopher Mulvihill, our President, and the son of Gail Mulvihill.&#160;&#160;The amount of this expense for the twelve months
ended September 30, 2011 and 2010 was $158,879 and $128,959 respectively; which is recorded under Research and Development expenses.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company reimbursed North
Jersey Management Services, Inc. for payroll related expenses for the services of Joseph Bellantoni, the Company&#8217;s Chief
Financial Officer, and Maureen Cowell, the Company&#8217;s Corporate Secretary.&#160;&#160;Mr. Bellantoni is also the President
and Mrs. Cowell is the Vice President of North Jersey Management Services, Inc.&#160;&#160;The amount of this expense for the twelve
months ended September 30, 2011 and 2010 was $78,000 and $49,500 respectively; which is recorded under General and Administrative
expenses.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In April 2010, we entered
into a twenty-year ground lease with Route 94 Development Corporation (&#8220;Route 94&#8221;) to lease a portion of an approximately
fifteen acre parcel in the town of Hamburg, located in Hardyston Township, New Jersey, on which we intend to construct a RoboticValet&#8482;
parking facility.&#160; The leased property is adjacent to Grand Cascades Lodge (&#8220;Cascades&#8221;), a hotel within the Crystal
Springs Golf and Spa Resort (&#8220;the Resort&#8221;). The parking facility is being constructed by Crystal Springs Builders,
LLC (&#8220;Builders&#8221;).&#160;&#160; It is intended that this facility will be used by us primarily for demonstration and
marketing purposes in the eastern portion of the United States.&#160; In consideration of the benefits to us under the terms of
the lease, we agree to provide to the lessor and its affiliates parking and storage space within the facility at no cost to the
lessor and its affiliates subject to our right to use the facility for demonstration purposes.&#160; In addition, we are required
to pay the operating costs, premiums on the insurance required under the terms of the lease and incremental property taxes resulting
from our construction of the facility.&#160; For a period of 60 months, commencing five years after execution of the lease, the
lessor has the option to purchase the facility from us and we have a right to cause the lessor to buy from us the facility we construct.&#160;
The price to be paid by the lessor upon exercise of its option to purchase the facility is 110% of the greater of (i) the depreciated
value of the facility, or (ii) the fair market value of the facility, and the price to be paid by the lessor upon exercise of our
right to cause the lessor to buy the facility is $1.00.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Resort owns and operates
seven golf courses, two hotels and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more
than 40 additional entities, including the above named entities.&#160;&#160;Gail Mulvihill owns 50% of each of Builders, Cascades
and Route 94 and, indirectly, through these and various other entities, Gail Mulvihill and her family own approximately 50% of
the Resort.&#160;&#160;Except as set forth above, no other officer, director or 5% or greater stockholder of the company has any
equity interest in Builders, Cascades or Route 94.&#160;&#160;The Company made payments of approximately $980,000 and $375,500
to Crystal Springs Builders, LLC, (&#8220;Builders&#8221;) and approximately $39,000&#160;&#160;and $15,000to Grand Cascades Lodge
at Crystal Springs, LLC (&#8220;Cascades&#8221;) in the fiscal years ended September 30, 2011 and 2010, respectively.&#160; No
payment was made to Route 94 in the fiscal years ended 2011 and 2010.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>&#160;</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 12 &#8211; RELATED
PARTY TRANSACTIONS (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On May 14, 2010, the Company
entered into a 6% convertible line of credit for up to $1,300,000 with Sail Energy, a company owned by Gail Mulvihill, who has
sole voting and investment control.&#160;&#160;In May 2011, it was agreed between the Company and Sail Energy that there would
be no additional borrowing under this line of credit.&#160;&#160;The amount outstanding on this loan, including accrued interest,
as of September 30, 2011 is $300,142.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In July 2010, Venturetek,
LP, a principal stockholder of the Company, entered into a 6% convertible promissory note with the Company for $273,000.&#160;&#160;The
amount outstanding on this note, including accrued interest, as of September 30, 2011 is $292,461.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In February and March 2011,
the Company drew down a total of $2,166,664 on its line of credit of $3,250,000.&#160;&#160;In connection with the draw down, the
Company issued notes in an aggregate amount of $1,166,666 to four related parties.&#160;&#160;In addition, in connection with the
draw down, five-year warrants were issued to these related parties to purchase a total of 175,000 shares of common stock at an
exercise price of $6.00 per share.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In May 2011, the Company
drew down the remaining $1,083,336 on the aforementioned line of credit of $3,250,000.&#160;&#160;In connection with the draw down,
the Company issued notes in an aggregate amount of $583,334 to four related parties.&#160;&#160;In addition, in connection with
the draw down, five-year warrants were issued to these related parties to purchase a total of 87,500 shares of common stock at
an exercise price of $6.00 per share.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In September 2011, Atlantic
and Madison of NJ Corp, a company owned by Gail Mulvihill, loaned the Company $775,000, with the understanding that upon finalization
of the documents related to a private placement offering by the Company, these loans will be considered an investment in such private
placement.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Our management believes
that the terms of the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons
at the time and under the circumstances as when the transactions were entered into.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 13 &#8211; COMMITMENTS
AND CONTINGENCIES</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Boomerang Utah is a joint
and several guarantor on a twenty-year promissory note owing to a non-affiliated bank in the principal amount of $773,913, bearing
interest at 3.807% per annum and due August 1, 2027.&#160;&#160;The promissory note is collateralized by the real property that
is the subject of the lease from SB&amp;G to Boomerang.&#160;&#160;Messrs. Gene Mulvihill, Checketts, and Koffman, are the other
joint and several guarantors of the promissory note.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Our principal office, consisting
of approximately 2,022 square feet, located at 355 Madison Avenue, Morristown, NJ was under a five year lease with NYC Skyline
Realty, LLC, a non-affiliated entity.&#160;&#160;During the year ended September 30, 2011, we gave notice to terminate this lease
effective December 31, 2011.&#160;&#160;We entered into a five year lease, commencing on December 1, 2011, on a new principal office,
consisting of approximately 7,350 square feet, located at 30 B Vreeland Avenue, Florham Park, NJ. &#160;&#160;This is also the
location of our sales and marketing activities.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0"><FONT STYLE="font-weight: normal">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 13 &#8211; COMMITMENTS
AND CONTINGENCIES (continued)</B></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The aggregate future minimum
annual rental payments, exclusive of escalation payments for taxes and operating costs, under operating leases are as follows:</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; text-align: left; text-indent: 0pt">Year ended September 30, 2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">87,129</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">September 30, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">127,706</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0pt">September 30, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,219</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0pt">September 30, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">138,731</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0pt">September 30, 2016</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">144,244</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: 0pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">631,029</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="text-align: left; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 14 &#8211; CONCENTRATION
OF RISK</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Financial instruments, which
potentially expose the Company to concentrations of risk, consist primarily of cash and trade accounts receivable.&#160;&#160;At
September 30, 2011, our cash balances did not exceed federally insured limits, but at September 30, 2010 the cash balances in our
accounts exceeded federally insured limits by approximately $3,721,280.&#160;&#160;The Company has not experienced any losses to
date resulting from this policy.&#160;&#160;Certain vendors to the Company also accounted for a large representation of its purchases.&#160;&#160;The
purchases from four vendors were in excess of 5% of purchases.&#160;&#160;The Company routinely assesses the financial strength
of its customers, and as a consequence believes the concentration of these credit risks are limited.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 15 &#8211; SUBSEQUENT
EVENTS</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">On
October 1,&#160;2011, the Company entered into an amendment with Stan Checketts Properties, to extend, on a month-to-month basis,
its lease on the approximately 20,400 square feet of manufacturing and office space in Logan, Utah.&#160; See Note 12.</FONT></P>

<P STYLE="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In October 2011, we entered
into a five year lease, commencing on December 1, 2011, on a new principal office, consisting of approximately 7,350 square feet,
located at 30 B Vreeland Avenue, Florham Park, NJ. This is also the location of our sales and marketing activities.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In October 2011, Atlantic
and Madison of NJ Corp loaned the Company $676,000.&#160;&#160;On November 1, 2011, this outstanding debt was refinanced as part
of the private placement offering described below.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On October 28, 2011, Atlantic
and Madison of NJ Corp caused the $300,000 bank note to be paid in full.&#160;&#160;See Note 10 &#8211; Debt.&#160;&#160;Accordingly,
the Company became indebted to Atlantic and Madison of NJ Corp for $300,000.&#160;&#160;This note is included in the $676,000 of
loans described above.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On October 28, 2011, Atlantic
and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt owed to it by the Company to Christopher
Mulvihill.&#160;&#160;The debt outstanding under these notes was refinanced on November 1, 2011, as part of the private placement
offering described below.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On October 28, 2011, Lake
Isle Corp, caused the $1,000,000 bank line of credit to be paid in full.&#160;&#160;See Note 10 &#8211; Debt.&#160;&#160;Accordingly,
the Company became indebted to Lake Isle Corp for $1,000,000, and this debt was refinanced on November 1, 2011, as part of the
private placement offering described below.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">On October 28, 2011, the Company entered into an employment agreement
with David K. Koch, its Chief Operating Officer, with an effective date of August 1, 2011.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 1, 2011, Mark
Patterson, our Chief Executive Officer, loaned us $100,000.&#160;&#160;The debt outstanding under this loan was refinanced on November
18, 2011, as part of the private placement offering described below.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><I>Private Placement Offering</I></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 1, 2011, the
Company issued to subscribers (&#8220;Subscribers&#8221;) 6% convertible promissory notes (&#8220;Notes&#8221;) in the aggregate
principal amount of approximately $9.4 million and warrants (&#8220;Warrants&#8221; and collectively with the Notes, the &#8220;Securities&#8221;)
to purchase approximately 2.2 million shares of Common Stock of the Company in the first of three (3) closings of a private placement
(the &#8220;Offering&#8221;) for which the Company received cash proceeds of approximately $2.7 million and refinanced approximately
$6.7 million of then existing short-term indebtedness. For each $100,000 invested, a Subscriber was issued a $100,000 principal
amount Note and Warrants to purchase 23,530 shares of the Company&#8217;s Common Stock.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 15 &#8211; SUBSEQUENT
EVENTS (continued)</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">As part of the Offering,
on November 18, 2011, we issued to Subscribers Notes in the aggregate principal amount of approximately $1.35 million and Warrants
to purchase approximately 318,000 shares of Common Stock for which the Company received cash proceeds of approximately $1.25 million
and refinanced approximately $100,000 of indebtedness.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&#160;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">As part of the Offering,
on December 9, 2011, we issued to Subscribers Notes in the aggregate principal amount of approximately $925,000 and Warrants to
purchase approximately 218,000 shares of Common Stock, of which the Company received cash proceeds of approximately $925,000.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Notes are due five years
after the respective date of issuance and are convertible into Common Stock at $4.25 per share (the &#8220;Conversion Price&#8221;),
subject to weighted average adjustment for issuances of common stock or common stock equivalents below the Conversion Price, subject
to certain exceptions.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Interest accrues on the
Notes at 6% per annum. Interest is payable quarterly, commencing on December 31, 2011, at the Company&#8217;s option, interest
may be payable in: (i) cash or (ii) shares of the Common Stock. If the Company elects to pay interest in shares of its Common Stock
on an interest payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued
and unpaid interest payable on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the
last sale price of the Common Stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately
preceding such interest payment date (the &#8220;Average Price&#8221;), if the average daily trading volume (the &#8220;ADTV&#8221;)
of the Common Stock for the ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however
if the ADTV is equal to or greater than $100,000, it will be the Average Price, and not the Conversion Price.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The outstanding principal
amount of the Notes and accrued and unpaid interest thereon will automatically convert into a number of shares of Common Stock
determined by dividing the outstanding principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion
Price in effect on the</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">mandatory conversion date.
The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30 immediately preceding
trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of the Notes are eligible
for resale under an effective registration statement and/or Rule 144 promulgated under the Securities Act of 1933, as amended,
without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading day period equals or exceeds $500,000.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">If an event of default as
defined in the Notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the Note then
outstanding to be, due and payable.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Warrants are exercisable
for a period of five years from the respective date of issuance at $4.25 per share, subject to weighted average adjustment for
issuance below the exercise price, subject to certain exceptions.&#160;&#160;Cashless exercise is permitted if the average trading
volume of the Company&#8217;s Common Stock during at least five (5) of the ten (10) consecutive trading days immediately preceding
the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of the last sale price of the
Common Stock during the five (5) consecutive trading days prior to the notice of exercise. In certain instances, a holder shall
not be permitted to exercise the Warrant if such exercise would result in such holder&#8217;s total ownership of the Company&#8217;s
Common Stock exceeding 4.9%.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

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<P STYLE="text-align: center; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-weight: normal">FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010</FONT></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0"><B>&#160;</B></P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><B>NOTE 15 &#8211; SUBSEQUENT
EVENTS (continued)</B></P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In connection with the Offering,
the Company paid Gilford Securities Incorporated, as placement agent, a cash fee of approximately $243,989 for its services as
placement agent. The Company issued to the placement agent warrants (the &#8220;Placement Agent Warrants&#8221;) to purchase 109,177
shares of Common Stock. The Placement Agent Warrants expire five years from the respective date of issuance and contain substantially
the same terms as those issued to Subscribers.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The Company also entered
into a registration rights agreement with the Subscribers. Pursuant to the registration rights agreement, the Company agreed to
file a registration statement within 90 days after the closing date of the Offering (the &#8220;Closing Date&#8221;) to register
for resale the shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants and Placement Agent Warrants
(collectively, the &#8220;Registrable Shares&#8221;). In the event that the SEC limits the number of Registrable Shares that may
be included in the registration statement, the Company shall include only those Registrable Shares permitted by the SEC and shall
file additional registration statements at the earliest practical date as the Company is permitted to do so in accordance with
SEC guidelines. The Company shall use its best efforts to cause (i) the Registration Statement to be effective within 150 days
of the Closing Date, and (ii) any additional registration statements to be declared effective within 90 days of the required filing
date.</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">In the event that a registration
statement is not filed or declared effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable
Shares an amount equal to 1% of the original principal amount of the investor&#8217;s Note, multiplied by a fraction with the numerator
equal to the number of Registrable Shares that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the Notes and exercise of the Warrants purchased pursuant
to the Subscription Agreement and owned by such holder.</P>

<P STYLE="text-align: left; text-indent: 0pt; margin: 0pt 0">&#160;</P>

<P STYLE="text-indent: 0pt; margin: 0pt 0"></P>

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<P STYLE="text-indent: 0pt; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BOOMERANG SYSTEMS INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED BALANCE SHEETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">June&nbsp;30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September&nbsp;30,</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">ASSETS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current assets:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">3,261,098</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">65,590</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Restricted cash</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">593,228</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">225,360</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">411,336</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">284,219</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">202,189</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Prepaid expenses and other assets</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">59,885</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">37,993</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Costs in excess of billings</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">316,911</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">521,213</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total current assets</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,740,701</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,238,321</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Property, plant and equipment, net</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,788,481</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,874,678</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other assets:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Note receivable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">16,748</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Security deposit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">20,825</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Investment at equity</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">221,010</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">139,836</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total other assets</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">241,835</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">156,584</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total assets</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,771,017</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,269,583</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">LIABILITIES AND STOCKHOLDERS' DEFICIT</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current liabilities:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable and accrued liabilities</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">1,436,813</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">1,635,353</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Due to related party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">132,457</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deposit payable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">99,403</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">154,403</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Billings in excesss of costs and estimated earned profits on uncompleted contracts</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">514,408</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Estimated loss on uncompleted contract</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">632,115</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">188,484</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Debt- current portion</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">96,151</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">110,780</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total current liabilities</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,911,347</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,089,020</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Long term liabilities:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Debt- long term, net of discount</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">2,668,533</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">2,807,869</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Debt- long term- related party, net of discount</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,590,083</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,425,334</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Derivative liability</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,411,740</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total long term liabilities</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,670,356</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,233,203</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total liabilities</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,581,703</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,322,223</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders' deficit:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Preferred stock, $0.01 par value; authorized shares 1,000,000;<BR> 0 shares issued and outstanding</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Common stock, $0.001 par value; authorized shares 400,000,000 and 400,000,000;<BR> 7,399,086 and 7,277,192 issued and outstanding</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">7,399</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">7,277</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid in capital</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">53,373,148</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">48,752,581</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(66,191,233</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(52,812,498</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total stockholders' deficit</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,810,686</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,052,640</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total liabilities and stockholders' deficit</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,771,017</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,269,583</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BOOMERANG SYSTEMS INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(UNAUDITED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Nine&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Three&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30,</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Revenues:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; text-align: left; padding-bottom: 1pt">System sales</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">477,290</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">1,319,620</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">96,512</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Total revenues</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">477,290</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,319,620</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">96,512</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cost of goods sold</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,069,846</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,496,467</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,345,313</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">473,934</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Gross loss</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,592,556</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,176,847</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,248,801</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(473,934</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Expenses:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Sales and marketing</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">877,831</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,891,800</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">271,067</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">298,860</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">General and administrative expenses</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">5,165,169</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6,842,084</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,598,414</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,060,401</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Research and development</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,033,435</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,792,653</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">437,731</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">471,022</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Depreciation and amortization</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">183,907</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,209</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">62,410</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,106</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total expenses</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,260,342</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,564,746</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,369,622</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,843,389</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss from operations</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,852,898</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(11,741,593</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,618,423</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,317,323</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other income (expenses):</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest income</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">256</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,553</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">329</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest expense</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(486,299</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(60,858</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(190,983</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(32,709</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Other income</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">62,099</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">51,620</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Financing costs</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(3,899,866</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(974,939</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loss on disposal of equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(1,893</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loss on equity investment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(105,426</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(52,037</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(47,345</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(17,128</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Amortization of discount on convertible debt</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(1,414,594</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(559,090</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Gain (loss) on fair value of derivative</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,579,818</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,867,674</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total other income (expenses)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,523,782</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,013,101</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,613,471</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,024,447</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Loss before provision for income taxes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(13,376,680</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(15,754,694</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(7,231,894</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(3,341,770</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Provision for income taxes</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,055</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,021</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">25</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,429</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(13,378,735</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(15,772,715</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(7,231,919</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,352,199</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss per common share - basic and diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1.83</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.22</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.98</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.46</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Weighted average number of shares - basic and diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,305,825</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,111,900</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,354,554</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,277,192</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BOOMERANG SYSTEMS INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FOR THE NINE MONTHS ENDED JUNE 30, 2012
AND 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(UNAUDITED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">CASH FLOWS FROM OPERATING ACTIVITIES:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net loss</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">(13,378,735</TD>
    <TD STYLE="width: 1%; text-align: left">)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">(15,772,715</TD>
    <TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Adjustments to reconcile net loss operations to net cash (used in) operating activities:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Depreciation and amortization</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">183,907</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">38,209</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Loss on disposal of equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,893</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Grant of options for services</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">472,399</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,812,939</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Issuance of warrants for services</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">680,554</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,334,951</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Issuance of warrants for financing</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,899,866</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Issuance of common stock for services</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">50,001</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Issuance of common stock for interest expense</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">469,160</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Loss on fair value of derivative</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">2,579,818</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Amortization of discount on convertible debt</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,414,594</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Loss on equity investment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">105,426</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">52,037</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Changes in assets and liabilities:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Decrease/(increase) in accounts receivable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">185,976</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(170,806</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Increase) in restricted cash</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(593,228</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Decrease in notes receivable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">16,748</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">8,710</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Increase) in notes receivable (non-current)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(683</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Increase) in security deposit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(20,825</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Decrease/(increase) in costs and estimated earned profits in excess of billings on completed contracts</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">204,302</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(453,199</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Increase) in inventory</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(82,030</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(200,667</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Increase) in prepaid expenses and other assets</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(21,892</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(19,053</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Decrease) in accounts payable and accrued liabilities</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(100,356</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(63,853</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Increase in due to related party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">132,457</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">212,600</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">(Decrease)/increase in deposit payable</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(55,000</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">15,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Increase/(decrease) in billings in excess of costs and estimated earned profits on uncompleted contracts</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">514,408</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(48,186</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt; padding-bottom: 1pt">Increase in estimated loss on uncompleted contract</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">443,631</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">158,589</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">NET CASH (USED IN) OPERATING ACTIVITIES</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,798,685</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7,194,368</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">CASH FLOWS FROM INVESTING ACTIVITIES:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Purchase of property, plant and equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(97,710</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(1,446,648</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt; padding-bottom: 1pt">Additional equity investment</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">(186,600</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">(57,534</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">NET CASH (USED IN) INVESTING ACTIVITIES</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(284,310</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,504,182</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">CASH FLOWS FROM FINANCING ACTIVITIES:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Repayment of notes payable and line of credit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(1,722,497</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(21,097</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Proceeds from notes payable and line of credit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">2,176,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,550,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Proceeds from private placement- convertible notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">9,825,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Proceeds from private placement- common stock</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,199,999</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">NET CASH PROVIDED BY FINANCING ACTIVITIES</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,278,503</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,728,902</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,195,508</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(3,969,648</TD>
    <TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">CASH AND CASH EQUIVALENTS - beginning of period</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">65,590</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,284,362</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">CASH AND CASH EQUIVALENTS- end of period</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,261,098</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">314,714</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">SUPPLEMENTAL DISCLOSURE OF CASH FLOW&nbsp; INFORMATION:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash paid for:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 16.2pt">Interest</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,642</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 16.2pt">Income taxes</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,080</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,892</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: 0.25in; padding-left: 0.1in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Non-cash investing and financing activites:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 16.2pt">Conversion of notes payable and accrued interest into convertible debt</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,799,520</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 16.2pt">Issuance of common stock for interest expense</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">469,160</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 16.2pt">Conversion of debt and accrued interest into common stock</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">398,012</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 1 &ndash; ORGANIZATION AND NATURE OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The Company</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company, through its wholly owned subsidiary, Boomerang
Utah, is engaged in the design, development, and marketing of automated storage and retrieval systems for automobile parking and
containerized self-storage units. The Company was a developmental stage company through the first quarter of fiscal 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Unless the context otherwise requires, the terms &ldquo;Company,&rdquo;
&ldquo;we,&rdquo; &ldquo;our,&rdquo; and &ldquo;us,&rdquo; means Boomerang Systems, Inc. and its consolidated subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 20, 2011, an amendment to the Company&rsquo;s Certificate
of Incorporation was filed, effecting a one-for-twenty reverse split (the &ldquo;Reverse Split&rdquo;) of Boomerang&rsquo;s common
stock. The par value of the Company&rsquo;s common stock remained $0.001 per share and the number of shares of common stock authorized
to be issued remained at 400,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All share numbers in the financial statements give effect to
the Reverse Split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our fiscal year end is September 30<SUP>th</SUP>.&nbsp;&nbsp;We
define fiscal year 2012 as the twelve month period ended September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Basis of Presentation:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying unaudited consolidated financial statements
of the Company have been prepared for the interim period and are unaudited (consisting only of normal recurring adjustments) which
are in the in opinion of management, necessary for a fair presentation of the financial position and operating results for the
periods presented. The results of operations for the three and nine months ended June 30, 2012 are not necessarily indicative of
the results for the Company to be expected for the full fiscal year ending September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Reclassification:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain three and nine month ended June 30, 2011 items have
been reclassified to conform to the three and nine month ended June 30, 2012 presentation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Revenue Recognition:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues from the sales of RoboticValet&trade; and rack and
rail systems will be recognized using the percentage of completion method, whereby revenue and the related gross profit is determined
by comparing the actual costs incurred to date for the project to the total estimated project costs at completion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Project costs generally include all material and shipping costs,
our direct labor, subcontractor costs and an allocation of indirect costs related to the direct labor. Changes in the project scope,
site conditions, staff performance and delays or problems with the equipment used on the project can result in increased costs
that may not be billable or accepted by the customer and a loss or lower profit from what was originally anticipated at the time
of the proposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Estimates for the costs to complete the project are periodically
updated by management during the performance of the project. Provisions for changes in estimated costs and losses, if any, on uncompleted
projects are made in the period in which such losses are determined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">When the current estimate of total contract costs exceeds the
current estimate of total contract revenues, a provision for the entire loss on the contract is made.&nbsp; Losses are recognized
in the period in which they become evident under the percentage-of-completion method.&nbsp; The loss is computed on the basis of
the total estimated costs to complete the contract, including the contract costs incurred to date plus the estimated costs to complete.&nbsp;
As of June 30, 2012, it was estimated that we would incur a gross loss of $3,274,083 on one of our current contracts, which began
in fiscal year 2010. This loss is comprised of $2,641,968 recognized through the percentage of completion method from the inception
of the contract through June 30, 2012, and $632,115 as a provision for the remaining loss on a contract as of June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues of $477,290 and $1,319,620 have been recognized for
the nine months ended June 30, 2012 and 2011, respectively, under the percentage of completion method, and $96,512 and $0 for the
three months ended June 30, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company may have service contracts in the future after the
contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed according
to the terms of the contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Principles of Consolidation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Earnings Per Common Share:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We adopted ASC 260, <I>Earnings Per Share</I>. The statement
established standards for computing and presenting earnings per share (&ldquo;EPS&rdquo;). 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 nine months ended June 30, 2012 and 2011 were 7,305,825 and 7,111,900, respectively, and for the three months ended June 30,
2012 and 2011 were 7,354,554 and 7,277,192, respectively.&nbsp;&nbsp;The Company&rsquo;s common stock equivalents, of outstanding
options and warrants, have not been included as to include them would be anti-dilutive. As of June 30, 2012 and 2011, there were
fully vested options outstanding for the purchase of 641,385 and 641,385 common shares, respectively, and warrants for the purchase
of 8,472,266 and 3,986,184 common shares, respectively, both of which could potentially dilute future earnings per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock-Based Compensation:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The analysis and computation was performed based on our adoption
of ASC 718-10-25, <I>Compensation &ndash; Stock Compensation</I>, which requires the recognition of the fair value of stock-based
compensation.&nbsp;&nbsp;For the nine months ended June 30, 2012 and 2011, we conducted an outside independent analysis and our
own review, and based on the results, we recognized $472,399 and $562,942 in share-based payments related to non-vested stock options
that were issued from fiscal year 2008 through 2010, respectively, and $114,715 and $160,695 for the three months ended June 30,
2012 and 2011, respectively. We recognized $0 and $1,249,997 for fully vested options issued during the nine months ended June
30<FONT STYLE="color: black">, 2012</FONT> and 2011, respectively, and $0 and $0 for the three months ended June 30, 2012 and 2011,
respectively. We recognized $680,554 and $7,234,817 for the issuance of warrants during the nine months ended June 30<FONT STYLE="color: black">,
2012</FONT> and 2011, respectively, and $96,352 and $974,939 for the three months ended June 30, 2012 and 2011, respectively. We
also recognized $50,001 and $0 for the issuance of common stock for services during the nine months ended June 30, 2012 and 2011,
respectively, and $50,001 and $0 for the three months ended June 30, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Derivative liability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for reset provisions in connection with
their issuance of debt, and reset provisions of equity instruments attached to their debt, in accordance with Emerging Issues Task
Force (&ldquo;EITF&rdquo;) Consensus No. 07-5 &ldquo;Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity&rsquo;s
Own Stock&rdquo; (EITF 07-5&rdquo;). Under EITF 07-5, instruments which contain full ratchet anti-dilution provisions are no longer
considered indexed to a company&rsquo;s own stock for purposes of determining whether it meets the first part of the scope exception
in paragraph 11 (a) of FASB 133 &ldquo;Accounting for Derivative Instruments and Hedging Activities&rdquo;, now promulgated in
ASC 815, &ldquo;Derivative and Hedging&rdquo;. Under ASC 815 the Company is required to (1) evaluate an instrument&rsquo;s contingent
exercise provisions and (2) evaluate the instrument&rsquo;s settlement provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Fair Value Measurements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As defined in FASB ASC Topic 820 &ndash; 10, <I>&ldquo;Fair
Value Measurements and Disclosures,&rdquo;</I> fair value is the price that would be received upon the sale of an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 &ndash;
10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.
The statement requires fair value measurements be classified and disclosed in one of the following categories:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="width: 0in">&nbsp;</TD>
    <TD STYLE="width: 1in; text-align: left">Level&nbsp;1:</TD>
    <TD STYLE="text-align: left">Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="width: 0in">&nbsp;</TD>
    <TD STYLE="width: 1in; text-align: left">Level 2:</TD>
    <TD STYLE="text-align: left">Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%">
<TR STYLE="vertical-align: top; text-align: justify">
    <TD STYLE="width: 0in">&nbsp;</TD>
    <TD STYLE="width: 1in; text-align: left">Level 3:</TD>
    <TD STYLE="text-align: left">Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company&rsquo;s valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As required by FASB ASC Topic 820 &ndash; 10, financial assets
and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company&rsquo;s
assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation
of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The estimated fair value of the derivative liability was calculated
using the Black-Scholes option pricing model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth, by level within the fair value
hierarchy, the Company&rsquo;s financial assets and liabilities that were accounted for at fair value on a recurring basis as of
June 30, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair&nbsp;Value&nbsp;Measurements&nbsp;at&nbsp;June 30, 2012</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Description</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(Level&nbsp;1)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(Level&nbsp;2)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">(Level&nbsp;3) &nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total <BR>Carrying <BR>Value</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: left; padding-bottom: 1pt">Derivative liability</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">13,411,740</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD>
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">13,411,740</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">-</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">13,411,740</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">13,411,740</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">The Company incurred the derivative
liability set forth on the June 30, 2012 balance sheet in connection with the Offering (see Note 7). The initial carrying value
of the derivative liability was $10,831,922.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Research and Development:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to ASC 730, <I>Research and Development</I>, research
and development costs are expensed as incurred. Research and Development expense for the nine months ended June 30, 2012 and 2011
were $1,033,435 and $1,792,653, respectively, and $437,731 and $471,022 for the three months ended June 30, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Advertising: </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Advertising costs amounted to $114,783 and $201,374 for the
nine months ended June 30, 2012 and 2011<I>, </I>respectively, and $42,944 and $62,591 for the three months ended March 31, 2012
and 2011, respectively. Advertising costs are included in Sales and Marketing and expensed as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Use of Estimates:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Accounts Receivable and Allowance for Doubtful Accounts:
</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.&nbsp;&nbsp;We consider our accounts receivables to be favorably collectible.&nbsp;&nbsp;Accordingly,
we have not recorded an allowance for doubtful accounts at June 30, 2012 and September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; INVESTMENT AT EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is a partner in the United Arab Emirates &ldquo;UAE&rdquo;
joint venture, Boomerang Systems Middle East, LLC.&nbsp;&nbsp; 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.&nbsp;&nbsp;The
equity method is used to calculate the current amount of this investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the nine months ended June 30, 2012, the Company made
additional investments in the UAE joint venture of $45,600.&nbsp;&nbsp;Based on the equity method, the 49% loss we recognized on
this investment for the nine months ended June 30, 2012 was $44,150.&nbsp;&nbsp;After factoring in the loss, our carrying value
on this investment was $141,286 at June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%">Balance as of September 30, 2011</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 12%; text-align: right">139,836</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional investment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">45,600</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss on investment (49%)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(44,150</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of June 30, 2012</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">141,286</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 15, 2012, Boomerang MP Holdings, Inc., a wholly
owned subsidiary of the Company, was formed with the purpose of entering into a mechanical parking joint venture. On February 16,
2012, Boomerang MP Holdings, Inc., formed a joint venture with Stokes Industries-USA, LLC (&ldquo;Stokes&rdquo;). The joint venture,
Boomerang-Stokes Mechanical Parking LLC, is owned 50% by Boomerang MP Holdings, Inc. and 50% by Stokes. Boomerang MP Holdings,
Inc., is committed to providing a minimum of $250,000 of capital to fund the initial operations and marketing efforts during the
initial two year period of the joint venture. Boomerang MP Holdings, Inc., shall also license the name &ldquo;Boomerang&rdquo;
to the joint venture for use in North America on a royalty free, non-exclusive basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 3 &ndash; INVESTMENT AT EQUITY (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the nine months ended June 30, 2012, the Company made
an investment of $141,000 in the joint venture. Based on the equity method, the 50% loss we recognized on this investment for the
nine months ended June 30, 2012 was $61,276. After factoring in the loss, our carrying value on this investment was $79,724 at
June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Balance as of September 30, 2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 85%; text-align: left">Additional investment</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right">141,000</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss on investment (50%)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(61,276</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of June 30, 2012</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">79,724</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 4- INVENTORY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inventory consisting of parts, materials and assemblies is stated
at the lower of cost or market. Cost is determined using the weighted cost method. Inventory was $284,219 and $202,189 at June
30, 2012 and September 30, 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 5 - PROPERTY AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment are stated at cost. Maintenance and repairs
are charged to expense as incurred.&nbsp;&nbsp;Costs of major additions and betterments are capitalized.&nbsp;&nbsp;Depreciation
is calculated on the straight-line method over the estimated useful lives of the respective assets, which range from three to fifteen
years.&nbsp;&nbsp;Depreciation and amortization for the nine months ended June 30, 2012 and 2011 were $183,907 and $38,209, respectively,
and $62,410 and $13,106 for the three months ended June 30, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property, plant and equipment consist of the following at June
30, 2012 and September 30, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012<BR> (Unaudited)</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid; vertical-align: top">September&nbsp;30,&nbsp;2011</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Computer equipment</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">280,245</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">242,149</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Machinery and equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,274,837</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">96,855</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Furniture and fixtures</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">62,803</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">35,856</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Leasehold improvements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">62,469</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">62,469</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Buildings</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,450,450</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Construction in progress (1)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,595,765</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">3,130,804</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">3,033,094</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; padding-bottom: 1pt">Less: Accumulated depreciation</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(342,323</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(158,416</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,788,481</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,874,678</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) All construction in progress at September 30, 2011, was
for the demonstration facility at Crystal Springs Resort which was completed in October 2011 and reallocated to Machinery and equipment
and Buildings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 6 &ndash; BILLINGS IN EXCESS OF COSTS/COSTS IN EXCESS
OF BILLINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company entered into two contracts, one in fiscal 2010 and
one in fiscal 2011 for construction of rack and rail-based parking systems and is recognizing revenue on the percentage of completion
method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Information with respect to uncompleted contracts at June 30,
2012 and September 30, 2011 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 6 &ndash; BILLINGS IN EXCESS OF COSTS/COSTS IN EXCESS
OF BILLINGS (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September&nbsp;30,&nbsp;2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Costs in excess of billings:</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">(Unaudited)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Earnings on billings to date</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">1,901,176</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">2,105,478</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Billings</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,584,265</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,584,265</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total costs in excess of billings</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">316,911</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">521,213</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">June&nbsp;30,&nbsp;2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September&nbsp;30,&nbsp;2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Billings in excess of costs:</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">(Unaudited)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Earnings on billings to date</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">681,592</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">-</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Billings</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,196,000</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total (billings in excess of costs)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(514,408</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7- DEBT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Current Debt</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company entered into a sixty month capital equipment lease
with a third party commencing in December 2007. The total principal balance of this lease was $135,675 at an annual rate of 6.45%.
At June 30, 2012, the outstanding principal balance was $15,613, all of which was classified as current debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective February 6, 2008, the Company was indebted for an
unsecured loan to a third party. As of June 30, 2012, the principal balance of this loan was $80,538.&nbsp;&nbsp;The loan is not
collateralized, bears interest at an annual rate of 10% and is due on demand.&nbsp;&nbsp;As of June 30, 2012, the balance of the
loan including accrued interest was $95,877.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 16, 2012, the Company entered into a $400,000 line of
credit with a bank, which bore interest at a rate of 5% per annum and was due on August 14, 2012. During the quarter, the Company
borrowed an aggregate of $400,000 under the line. The line of credit was paid in full and terminated on June 14, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Long-Term Debt</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Private Placement Offering &ndash; November/December 2011</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 1, 2011, the Company issued to subscribers (&ldquo;Subscribers&rdquo;)
6% convertible promissory notes (&ldquo;Notes&rdquo;) in the aggregate principal amount of approximately $9.4 million and warrants
(&ldquo;Warrants&rdquo;) to purchase approximately 2.2 million shares of Common Stock of the Company in the first of three (3)
closings of a private placement (the &ldquo;Offering&rdquo;) for which the Company received cash proceeds of approximately $2.7
million and refinanced approximately $6.7 million of then existing short-term indebtedness. For each $100,000 invested, a Subscriber
was issued a $100,000 principal amount Note and Warrants to purchase 23,530 shares of the Company&rsquo;s Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of the Offering, on November 18, 2011, we issued to
Subscribers Notes in the aggregate principal amount of approximately $1.35 million and Warrants to purchase approximately 318,000
shares of Common Stock for which the Company received cash proceeds of approximately $1.25 million and refinanced approximately
$100,000 of indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of the Offering, on December 9, 2011, we issued to Subscribers
Notes in the aggregate principal amount of approximately $925,000 and Warrants to purchase approximately 218,000 shares of Common
Stock, of which the Company received cash proceeds of approximately $925,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7- DEBT (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Notes are due five years after the respective date of issuance
and are convertible into Common Stock at $4.25 per share (the &ldquo;Conversion Price&rdquo;), subject to weighted average adjustment
for issuances of common stock or common stock equivalents below the Conversion Price, subject to certain exceptions. The Warrants
issued with the debt have a five year life with an initial exercise price of $4.25 per share, subject to adjustment for issuances
of common stock or common stock equivalents below the Conversion Price, subject to certain exceptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest accrues on the Notes at 6% per annum. Interest is payable
quarterly, commencing on December 31, 2011, at the Company&rsquo;s option, interest may be payable in: (i) cash or (ii) shares
of the Common Stock. If the Company elects to pay interest in shares of its Common Stock on an interest payment date, the number
of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable on such
interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale price of the Common Stock
during the ten (10) consecutive trading days ending on the</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">fifth (5th) trading day immediately preceding such interest
payment date (the &ldquo;Average Price&rdquo;), if the average daily trading volume (the &ldquo;ADTV&rdquo;) of the Common Stock
for the ten (10) trading days prior to the interest payment date is less than $100,000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">per day, provided, however if the ADTV is equal to or greater
than $100,000, it will be the Average Price, and not the Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The outstanding principal amount of the Notes and accrued and
unpaid interest thereon will automatically convert into a number of shares of Common Stock determined by dividing the outstanding
principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect on the mandatory conversion
date. The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30 immediately
preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of the Notes are
eligible for resale under an effective</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">registration statement and/or Rule 144 promulgated under the
Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company also entered into a registration rights agreement
with the subscribers. Pursuant to the registration rights agreement, the Company agreed to file a registration statement within
90 days after the closing date of the Offering (the &ldquo;Closing Date&rdquo;) to register for resale the shares of common stock
issuable upon conversion of the Notes and exercise of the Warrants and Placement Agent Warrants (collectively, the &ldquo;Registrable
Shares&rdquo;). The registration statement was timely filed and declared effective by the SEC. The Company shall use its best efforts
to cause any additional registration statements it may be required to file to be declared effective within 90 days of the required
filing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event that a registration statement is not filed or declared
effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable Shares an amount equal to 1%
of the original principal amount of the investor&rsquo;s Note, multiplied by a fraction with the numerator equal to the number
of Registrable Shares that were required to be included in such registration statement which is not so filed, declared effective
or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total number of
shares issued or issuable to the Investor upon conversion of the Notes and exercise of the Warrants purchased pursuant to the subscription
agreement and owned by such holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If an event of default as defined in the Notes exists, the holder
may declare the entire principal of, and all interest accrued and unpaid on, the Note then outstanding to be, due and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has valued the Warrants, and the beneficial conversion
features (&ldquo;BCF&rdquo;) of the Notes, to their maximum value in proportion to the Notes and had accounted for them as a discount
to the debt. In certain circumstances the convertibility features and the attached Warrants contain reset provisions which adjust
the conversion price of the Notes and the exercise price of the Warrants should the Company sell additional shares of common stock
below the initial conversion price of the Notes or warrant exercise price as agreed to upon entry into the convertible notes payable.
The Company has assessed that the reset provision for the convertibility feature and the warrant exercise price are such that they
are not indexed to the Common Stock and is therefore a derivative in accordance with ASC 815-40 (formerly EITF 07-5). As such the
derivative was valued on the date of its initiation, with each issuance of convertible debt, and will be re-valued at its fair
value at each subsequent interim and annual reporting period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company valued the Warrants and the BCF, and the resulting
derivative liability, at $5,309,941 each for the 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 will be amortized over the life of the note or until such
time as the note is repaid or converted, or upon exercise of the Warrants. The valuation of the 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 52.7% iii) risk free interest rate of 0.9% and expected term of 5 years. During the nine
months ended June 30, 2012 the Company has amortized $1,386,500 of the of debt discount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 &ndash; DEBT (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date(s) of the Note issuances the aggregate fair value
of the derivative was $10,619,882. The revaluation of the derivative as of June 30, 2012 resulted in a derivative value of $13,149,312.
The change in fair value of the derivative from the date(s) of note issuance through June 30, 2012 resulted in a loss on the fair
value of the derivative liability of $2,529,430 for the nine months ended June 30, 2012. The derivative liability was revalued
on June 30, 2012 using the Black-Scholes option pricing model with the following weighted assumptions: i) expected dividend rate
of 0% ii) expected volatility of 53.43% iii) risk free interest rate of 0.9% and expected term of 4.35 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the Offering, the Company issued warrants
to the placement agent (the &ldquo;Placement Agent Warrants&rdquo;) to purchase shares of Common Stock. The Company issued an aggregate
of 109,176 Placement Agent Warrants in November and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 Warrants issued to the purchasers
of Notes in the 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 Warrants issued to the purchasers of Notes
in the Offering, do not meet the definition of being indexed to the Company&rsquo;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 $212,040 upon the Placement Agent Warrants grant, was revalued at $262,428 at June 30, 2012. The valuation at June 30, 2012
was valued based on the Black-Scholes Model with assumptions similar to those used to value the Warrants granted to the debt holders
as of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 30, 2012. The difference in valuation for the nine months
ended June 30, 2012 was $50,388, accounted for as a loss on fair value of derivative.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Private Placement Offering &ndash; June 2012</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 14, 2012, the Company issued to subscribers 6% convertible
promissory notes due on June 14, 2017 (&ldquo;2012 Notes&rdquo;) in the aggregate principal amount of $5.0 million and warrants
to purchase Common Stock (&ldquo;2012 Warrants&rdquo;) in a private placement (the &ldquo;2012 Offering&rdquo;) for aggregate gross
cash proceeds of $5.0 million. For each $100,000 invested, a subscriber was issued a $100,000 principal amount 2012 Note and 2012
Warrants to purchase 20,000 shares of the Company&rsquo;s Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The 2012 Notes are convertible into Common Stock at $5.00 per
share (the &ldquo;Conversion Price&rdquo;), 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest accrues on the 2012 Notes at 6% per annum. Interest
is payable quarterly, commencing on June 30, 2012. At the Company&rsquo;s option, interest may be payable in: (i) cash or (ii)
shares of the Common Stock. If the Company elects to pay interest in shares of its Common Stock on an interest payment date, the
number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable
on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale price of the Common
Stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date (the &ldquo;Average Price&rdquo;), if the average daily trading volume (the &ldquo;ADTV&rdquo;) of the Common Stock for the
ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal
to or greater than $100,000, it will be the Average Price, and not the Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The outstanding principal amount of the 2012 Notes and accrued
and unpaid interest thereon will automatically convert into a number of shares of Common Stock determined by dividing the outstanding
principal amount of the 2012 Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect on the mandatory
conversion date. The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30
immediately preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of
the 2012 Notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated under the Securities
Act of 1933, as amended, without restriction as to volume or manner of sale, and (iii) the ADTV during such 30 trading day period
equals or exceeds $500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 &ndash; DEBT (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If an event of default as defined in the 2012 Notes exists,
the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 Notes then outstanding to be due
and payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company also entered into a registration rights agreement
with the subscribers. Pursuant to the registration rights agreement, the Company agreed to file a registration statement within
90 days after the final closing date of the Offering which occurred on July 13, 2012 (the &ldquo;Closing Date&rdquo;) to register
for resale the shares of Common Stock issuable upon conversion of the 2012 Notes and exercise of the 2012 Warrants and 2012 Placement
Agent Warrants defined below (collectively, the &ldquo;Registrable Shares&rdquo;). In the event that the SEC limits the number
of Registrable Shares that may be included in the registration statement, the Company shall include only those Registrable Shares
permitted by the SEC and shall file additional registration statements at the earliest practical date as the Company is permitted
to do so in accordance with SEC guidelines. The Company shall use its best efforts to cause (i) the registration statement to be
effective within 150 days of the Closing Date, and (ii) any additional registration statements to be declared effective within
90 days of the required filing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event that a registration statement is not filed or declared
effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable Shares an amount equal to 1%
of the original principal amount of the investor&rsquo;s 2012 Note, multiplied by a fraction with the numerator equal to the number
of Registrable Shares that were required to be included in the Registration Statement which is not so filed, declared effective
or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total number of
shares issued or issuable to the Investor upon conversion of the 2012 Notes and exercise of the 2012 Warrants purchased pursuant
to the subscription agreement and owned by such holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company has valued the 2012 Warrants and the beneficial
conversion features (&ldquo;BCF&rdquo;) of the 2012 Notes, to their maximum value in proportion to the notes and had accounted
for them as a discount to the debt. In certain circumstances the convertibility features and the 2012 Warrants contain reset provisions
which adjust the conversion price and the exercise price of the warrants should the Company sell additional shares of common stock
below the initial conversion price of the 2012 Notes or 2012 Warrant exercise price as agreed to upon entry into the convertible
notes payable. The Company has determined that the 2012 Notes are a derivative instrument due to the reset provision contained
within the notes. A derivative liability was not recorded when the 2012 Offering was entered into as the value of the such a derivative
was immaterial due to the Company's limited history with adjusting instruments from previous fundraisings that have similar reset
provisions. If the 2012 Notes&rsquo; reset provision should be triggered, a reassessment of recording a derivative will be made
at such time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company valued the 2012 Warrants and the BCF at $1,580,308
each for a total of $3,160,616 recorded as a discount to the convertible debt during the third quarter of fiscal 2012. This discount
will be 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 nine months ended June 30, 2012 the Company has amortized
$28,094 of the of debt discount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the 2012 Offering, the Company paid a placement
agent and another registered broker-dealer cash fees of approximately $274,000 in the aggregate. The Company issued to the placement
agent warrants (the &ldquo;2012 Placement Agent Warrants&rdquo;) to purchase 41,700 shares of Common Stock, which expire on June
14, 2017. The 2012 Placement Agent Warrants contain substantially the same terms as those issued to subscribers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 &ndash; DEBT (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Principal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">As&nbsp;of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Current&nbsp;Debt-&nbsp;Third&nbsp;Party:</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right; border-bottom: Black 1pt solid">6/30/2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right; border-bottom: Black 1pt solid">9/30/2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Maturity&nbsp;Date</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Interest&nbsp;Rate</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Secured</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left; padding-left: 9pt">Loan Payable- Third Party</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">80,538</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">80,538</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: center">Upon&nbsp;Demand</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">10</TD>
    <TD STYLE="width: 1%; text-align: left">%</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">No</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Lease Payable- Bank (current portion)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,613</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">30,242</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">12/31/2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">6.45</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">%</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">Yes</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total Current Debt- Third Party</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">96,151</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">110,780</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">Long-Term Debt &ndash; Third Party:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,665,763</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,250,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/18/2016</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">925,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">12/9/2016</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,965,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">6/14/2017</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Promissory Notes &ndash; Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,500,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Line of Credit - Bank</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,000,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Promissory Note &ndash; Bank</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">300,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Lease Payable- Bank</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">7,869</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">12/31/2012</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6.45</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">Yes</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Discount on Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(7,842,348</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Amortization of Discount</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">705,118</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total Long-Term Debt &ndash; Third Party</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,668,533</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,807,869</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Long-Term Debt- Related Party:</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">5,683,757</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">100,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/18/2016</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible Notes &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,035,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">6/14/2017</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loan Payable- Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">273,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loan Payable- Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">273,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loan Payable &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">220,763</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loan Payable &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">133,571</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loan Payable &ndash; Related Party</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">775,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Promissory Notes &ndash; Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">1,750,000</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">11/1/2016</TD>
    <TD>(1)</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD STYLE="text-align: left">%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">No</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Discount on Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">(5,938,150</TD>
    <TD STYLE="text-align: left">)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Amortization of Discount</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">709,476</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total Long-Term Debt- Related Party</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,590,083</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,425,334</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(1)</TD>
    <TD>This debt was reclassified from current to long-term pursuant to ASC 470-10-45-14. On November 1, 2011, as part of the Offering, this debt was refinanced through the issuance of long-term notes.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 7 &ndash; DEBT (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">Capital&nbsp;lease&nbsp;payable&nbsp;to&nbsp;bank*</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">6/30/2012</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">9/30/2011</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left">Secured by equipment</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">15,613</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD>
    <TD STYLE="width: 10%; text-align: right">38,111</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: current maturities</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15,613</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">(30,242</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total long-term debt</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,869</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>*payable in monthly&nbsp;installments of $2, 651 including
interest at 6.448% maturing on December 1, 2012</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 8- EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Common Stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 11, 2012, the Company issued 11,765 shares of common
stock to Dave Koch, our COO, pursuant to his employment agreement as payment for services provided. These shares of stock were
issued at $4.25 per share and the Company recorded an expense of $50,001 related to this issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 30, 2012, the Company issued 40,925 shares of common
stock in lieu of a cash payment of $173,890 of interest for the quarter ended June 30, 2012. Pursuant to the terms of the Notes,
these shares of stock were issued at $4.25 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 30, 2012, the Company issued 2,795 shares of common
stock in lieu of a cash payment of $13,151 of interest for the quarter ended June 30, 2012. Pursuant to the terms of the 2012 Notes,
these shares of stock were issued at $4.73 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At June 30, 2012, the Company reserved shares of common stock
for issuance upon exercise as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 87%">Options</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">641,385</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Warrants</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">8,472,266</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Convertible Notes</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: right">3,735,206</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">Total Shares Reserved</TD>
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">12,848,857</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Options:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of June 30, 2012, there was approximately $67,000 of total
unrecognized costs related to unvested stock options granted to employees. These costs are expected to be recognized over the next
two fiscal years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the 2012 Offering described in Note 7, on June 14,
2012, we issued 2012 Warrants to subscribers to purchase 1,000,000 shares of Common Stock of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the 2012 Offering, we issued warrants to
the placement agent (the &ldquo;2012 Placement Agent Warrants&rdquo;) to purchase shares of Common Stock. We issued 2012 Placement
Agent Warrants to purchase 41,700 shares of Common Stock in June 2012. We valued and expensed these warrants at $96,352 during
the three months ended June 30, 2012, based on the Black-Scholes Model. These 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The 2012 Warrants are exercisable at $5.00 per share, subject
to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally, the Exercise
Price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of the Company&rsquo;s Common
Stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the Common Stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the 2012 Warrants
if such exercise would result in such holder&rsquo;s total ownership of the Company&rsquo;s Common Stock exceeding 4.9%. The 2012
Warrants expire on June 14, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 9 - RELATED PARTY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">HSK Funding, Inc.,&nbsp;Lake Isle Corp.,&nbsp;and Venturetek,
LP, are beneficial holders of shares of our Company&rsquo;s common stock and certain of their members and stockholders are also
the members of SB&amp;G Properties, LC. (&ldquo;SB&amp;G&rdquo;), which is the landlord under a lease with us.&nbsp; Gail Mulvihill,
the individual who exercises sole voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our
President, and is a principal stockholder of our Company.&nbsp;&nbsp;SB&amp;G entered into a lease with Boomerang Utah dated October
1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan, Utah (&ldquo;Building A&rdquo;).&nbsp;&nbsp;The
Company assumed this lease in February 2008.&nbsp;&nbsp;The initial term of the lease was for one year with an annual rent of $260,610
plus real property and school taxes. In addition, Boomerang is obligated to pay for all utilities, repairs and maintenance to the
property. The approximately 29,750 square foot leased premises are used for Boomerang&rsquo;s manufacturing activities.&nbsp;&nbsp;On
March 15, 2010, Boomerang and SB&amp;G agreed to maintain these terms until September 30, 2011. This lease has been extended on
a month-to-month basis.&nbsp;&nbsp;On November 1, 2011, deferred rental payments totaling $220,763 were refinanced as part of the
private placement offering described in Note 7 &ndash; Debt. Deferred rental payments totaling $132,457 have been accrued as of
June 30, 2012 and classified as due to related party on our balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stan Checketts Properties (&ldquo;SCP&rdquo;), a company owned
by the chief executive officer of Boomerang&rsquo;s wholly owned subsidiary, Boomerang Sub, Inc., entered into a lease with Boomerang
Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah.&nbsp;&nbsp;The Company assumed
this lease in February 2008.&nbsp;&nbsp;The initial term of the lease was for one year at a fixed annual rent of $157,680 plus
real property and school taxes. In addition, Boomerang is obligated to pay for all utilities and for repairs and maintenance to
the property.&nbsp;&nbsp;The approximately 18,000 square foot leased premises are, in addition to Building A, also used for Boomerang&rsquo;s
manufacturing activities.&nbsp;&nbsp;We are currently&nbsp;leasing an additional 2,400 square feet of office and conference room
space with Stan Checketts Properties for $1,800 per month. On March 15, 2010, Boomerang and SCP agreed to maintain these terms
until September 30, 2011. On October 28, 2011, Boomerang and SCP amended the terms of the lease to provide for a monthly payment
of $14,940, effective as of October 1, 2011. On November 1, 2011, deferred rental payments totaling $133,571 were refinanced as
part of the private placement offering described in Note 7 &ndash; Debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SB&amp;G is obligated on a twenty-year promissory note due August
1, 2027 owing to Zions Bank. The principal amount&nbsp;due was $745,578 as of June 30, 2012, and the note bears interest at 3.807%
per annum. The promissory note is collateralized by the real property that is the subject of the lease from SB&amp;G to Boomerang
Utah. Boomerang and Messrs. Gene Mulvihill, Stan Checketts, and Burton Koffman (&ldquo;Koffman&rdquo;) are the joint and several
guarantors of this promissory note.&nbsp;&nbsp;Gene Mulvihill is the husband of Gail Mulvihill and the&nbsp;father of Christopher
Mulvihill, the President of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Gene 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&rsquo; pre-determined fair market value of
the equipment at the conclusion of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company used the services of Coordinate Services, Inc. for
product development.&nbsp;&nbsp;The owner of this company is Gene Mulvihill, Jr. who is the brother of Christopher Mulvihill, our
President, and the son of Gail Mulvihill.&nbsp;&nbsp;The amount of this expense for the nine months ended June 30, 2012 and 2011
was $116,103 and $106,694 respectively; which is recorded under Research and Development expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company reimbursed North Jersey Management Services, Inc.
for payroll related expenses for the services of Joseph Bellantoni, the former Chief Financial Officer of the Company, and Maureen
Cowell, the Company&rsquo;s Corporate Secretary.&nbsp;&nbsp;Mr. Bellantoni is also the President and Mrs. Cowell is the Vice President
of North Jersey Management Services, Inc.&nbsp;&nbsp;The amount of this expense for the nine months ended June 30, 2012 and 2011
was $58,500 and $58,500 respectively; which is recorded under General and Administrative expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 9 - RELATED PARTY TRANSACTIONS (continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2010, we entered into a twenty-year ground lease with
Route 94 Development Corporation (&ldquo;Route 94&rdquo;) to lease a portion of an approximately fifteen acre parcel in the town
of Hamburg, located in Hardyston Township, New Jersey, on which we constructed a RoboticValet&trade; parking facility.&nbsp; The
leased property is adjacent to Grand Cascades Lodge (&ldquo;Cascades&rdquo;), a hotel within the Crystal Springs Golf and Spa Resort
(&ldquo;the Resort&rdquo;). The parking facility was constructed by Crystal Springs Builders, LLC (&ldquo;Builders&rdquo;).&nbsp;&nbsp;
It is intended that this facility will be used by us primarily for demonstration and marketing purposes in the eastern portion
of the United States.&nbsp; In consideration of the benefits to us under the terms of the lease, we agree to provide to the lessor
and its affiliates parking and storage space within the facility at no cost to the lessor and its affiliates subject to our right
to use the facility for demonstration purposes.&nbsp; In addition, we are required to pay the operating costs, premiums on the
insurance required under the terms of the lease and incremental property taxes resulting from our construction of the facility.&nbsp;
For a period of 60 months, commencing five years after execution of the lease, the lessor has the option to purchase the facility
from us and we have a right to cause the lessor to buy from us the facility we construct.&nbsp; The price to be paid by the lessor
upon exercise of its option to purchase the facility is 110% of the greater of (i) the depreciated value of the facility, or (ii)
the fair market value of the facility, and the price to be paid by the lessor upon exercise of our right to cause the lessor to
buy the facility is $1.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Resort owns and operates seven golf courses, two hotels
and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more than 40 additional entities, including
the above named entities. Gail Mulvihill owns 50% of each of Builders, Cascades and Route 94 and, indirectly, through these and
various other entities, Gail Mulvihill and her family own approximately 50% of the Resort. Except as set forth above, no other
officer, director or 5% or greater stockholder of the Company has any equity interest in Builders, Cascades or Route 94.&nbsp;&nbsp;The
Company incurred expenses of $0 and approximately $1,037,700 for Builders during the nine months ended June 30, 2012 and 2011,
respectively. The Company incurred expenses of approximately $47,000 and $73,000 for Cascades for the nine months ended June 30,
2012 and 2011, respectively. No expenses were incurred for Route 94 during the nine months ended June 30, 2012 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the quarter ended June 30, 2012, the Resort paid $50,000
to the Company for the purchase of mechanical parking equipment that will be provided by Boomerang-Stokes Mechanical Parking LLC.
At June 30, 2012, the Company recorded this amount as a payable and has subsequently paid the amount in full to Boomerang-Stokes
Mechanical Parking LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our management believes that the terms of the above transactions
are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under the circumstances
as when the transactions were entered into.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In connection with the 2012 Offering, the following related
parties of the Company participated in the 2012 Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012&nbsp;Notes&nbsp;issued <BR>in&nbsp;2012&nbsp;Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012&nbsp;Warrants&nbsp;issued <BR>in&nbsp;2012&nbsp;Offering</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">MRP Holdings LLC(1) <BR></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">150,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">30,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sail Energy, LLC(2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">510,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Heather Mulvihill(3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">IA 545 Madison Assoc.(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">David Kent and Christine W. Koch(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(1)</TD>
    <TD>Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company&rsquo;s Chief Executive Officer and a director.</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(2)</TD>
    <TD>Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company&rsquo;s President and director.</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(3)</TD>
    <TD>Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(4)</TD>
    <TD>Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in">(5)</TD>
    <TD>David Kent Koch is the Company&rsquo;s Chief Operating Officer.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 10- COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Boomerang Utah is a joint and several guarantor on a twenty-year
promissory note owing to Zions bank in the principal amount of $745,578, 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&amp;G to Boomerang.&nbsp;&nbsp;Messrs.
Gene Mulvihill, Checketts, and Koffman, are the other joint and several guarantors of the promissory note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We entered into a five year lease on a new principal office,
which expires in November 2016. The aggregate future minimum annual rental payments on this lease, exclusive of escalation payments
for taxes and operating costs, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; text-align: left">Twelve months ended June 30, 2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">141,028</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">June 30, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">146,541</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">June 30, 2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">152,053</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">June 30, 2016</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">157,566</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">June 30, 2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">66,609</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">663,797</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTE 11 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 13, 2012, the Company issued to subscribers 2012 Notes
in the aggregate principal amount of $1.2 million and 2012 Warrants to purchase an aggregate of 240,000 shares of Common Stock
in a private placement (the &ldquo;2012 Offering&rdquo;) for aggregate gross cash proceeds of $1.2 million. For each $100,000 invested,
a subscriber was issued a $100,000 principal amount Note and Warrants to purchase 20,000 shares of the Company&rsquo;s Common Stock.
In connection with the 2012 Offering, the Company paid a placement agent and another registered broker-dealer cash fees of approximately
$78,000 in the aggregate. The Company issued to the placement agent warrants (the &ldquo;2012 Placement Agent Warrants&rdquo;)
to purchase 13,100 shares of Common Stock, which expire on June 14, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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    <!-- Field: /Page --><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Up to $6,200,000 aggregate principal
amount of 6% convertible notes due 2017</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">and warrants to purchase up to 1,294,800
shares of common stock</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">and shares of common stock issuable
upon conversion of the notes and the warrants</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;PROSPECTUS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">, 2012</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PART II &mdash; INFORMATION NOT REQUIRED
IN PROSPECTUS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Item 13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Expenses of Issuance and Distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the costs
and expenses, other than underwriting discounts and commissions, if any, payable by the Company relating to the sale of common
stock being registered. All amounts are estimates except the SEC registration fee:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 84%; text-align: left; padding-left: 0; padding-bottom: 0">SEC Registration Fee</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,939</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0; padding-bottom: 0">Legal Fees and Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0; padding-bottom: 0">Accounting Fees and Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 0; padding-left: 0">Miscellaneous Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,061</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0; padding-bottom: 0">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Item 14. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indemnification
of Directors and Officers<I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 145(a) of the Delaware General Corporation
Law authorizes a Delaware corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation), by reason of the fact that the person is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys&rsquo; fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action,
suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe
the person&rsquo;s conduct was unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 145(b) further authorizes a Delaware
corporation to indemnify any person serving in any such capacity who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against
expenses (including attorneys&rsquo; fees) actually and reasonably incurred in connection with the defense or settlement of such
action or suit, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Delaware Court
of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the extent that a present or former director
or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred
to above, or in defense of any claim, issue or matter therein, such person shall be indemnified by the corporation against expenses
(including attorneys&rsquo; fees) actually and reasonably incurred by such person. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 102(b)(7) of the Delaware General
Corporation Law enables a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary damages for violations of the director&rsquo;s fiduciary
duty, except (i) for any breach of the director&rsquo;s duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the Delaware General Corporation Law (providing for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. These provisions
will not limit the liability of directors or officers under the federal securities laws of the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As permitted by the Delaware General Corporation
Law, Boomerang Systems, Inc.&rsquo;s certificate of incorporation, as amended, eliminates liability of its directors for monetary
damages to the fullest extent permitted under applicable law. Boomerang Systems, Inc.&rsquo;s second amendment and restated bylaws
also provide, with certain exceptions, for indemnification to the fullest extent permitted by the Delaware General Corporation
Law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Boomerang Systems, Inc. has entered into
indemnification agreements with all of its directors, other than Mark Patterson. These indemnification agreements, among other
things,</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide for indemnification which mirrors the provisions of the Delaware General Corporation Law;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide for the mandatory advancement by Boomerang Systems, Inc. of expenses incurred by the director, provided that such director
will repay the amounts advanced if it is determined that the director was not entitled to be indemnified by Boomerang Systems,
Inc.;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide further indemnification to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically
authorized in Boomerang Systems, Inc.&rsquo;s certificate of incorporation, as amended, or second amendment and restated bylaws,
or the Delaware General Corporation Law; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provide that if the Delaware General Corporation Law is subsequently amended to increase the rights of directors to indemnification,
those increased rights will be deemed to apply to Boomerang Systems, Inc., but if such rights are narrowed, there will be no affect
on the indemnification granted to the directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">However, a director is not entitled to indemnification
under these agreements with respect to (i) claims initiated by the director (except claims relating to the director&rsquo;s right
to indemnification), (ii) claims relating to the director&rsquo;s right to indemnification that a court of competent jurisdiction
determines were not made in good faith or were frivolous; (iii) expenses or liabilities for which a directors&rsquo; and officers&rsquo;
liability insurance policy has paid the director directly; or (iv) expenses or payment of profits arising from the violation by
the director of Section 16(b) of the Exchange Act, or any successor statute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Patterson&rsquo;s employment agreement
provides that Boomerang Systems, Inc. will indemnify him to the greatest extent permitted by Section 145 of the Delaware General
Corporation Law. These indemnification rights will survive the termination of Mr. Patterson&rsquo;s employment for any reason.
Boomerang Systems, Inc. has obtained directors&rsquo; and officers&rsquo; liability insurance which covers certain liabilities,
including liabilities to Boomerang Systems, Inc. and its stockholders, in the amount of $10 million.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Item 15. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent
Sales of Unregistered Securities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">1.</TD><TD>On May 15, 2009, the Company issued options to purchase an aggregate of 50,000 shares at an exercise price of $2.00 per share
to three employees in lieu of cash compensation. All such options expire on May 14, 2014.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">2.</TD><TD>In fiscal 2009, the Company launched a private offering of its securities to affiliates and accredited investors in three tranches.
The private offering closed on December 14, 2009. On June 12, 2009, the Company completed the closing of the First Tranche which
involved the sale of an aggregate of 33,609 shares of our Series A Convertible Preferred Stock (&ldquo;Preferred Stock&rdquo;).
The aggregate offering proceeds for these shares of Preferred Stock sold in the First Tranche was $3,360,900 of which $1,895,000
was paid in cash and $1,465,900 was paid in forgiveness of debt. In September 2009, the Company amended its certificate of incorporation
to increase its authorized shares of common stock. As a result, under the terms of the Preferred Stock the 33,609 shares of Preferred
Stock were automatically converted into 1,680,450 shares of common stock in September 2009. On September 30, 2009, the Company
completed the Second Tranche which involved the sale of an aggregate of 554,713 shares of common stock. The aggregate offering
proceeds for the shares of common stock sold in the Second Tranche was $1,109,425 or $2.00 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 forgiven in exchange for
shares of Preferred Stock in the First Tranche. On December 14, 2009, the Company completed the Third Tranche which involved the
sale of an aggregate of 695,288 shares of common stock. The aggregate offering proceeds for the shares of common stock sold in
the Third Tranche was $1,390,575, or $2.00 per share, paid in cash.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">3.</TD><TD>By virtue of defaults occurring in the payment of the outstanding principal and interest on $1,500,000 on the Company&rsquo;s
promissory notes issued in August 2008, on August 31, 2009, pursuant to the terms of the promissory notes the Company issued to
the holders of the promissory notes five-year common stock purchase warrants to purchase an aggregate of 127,588 shares of common
stock exercisable at a price of $14.40 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">4.</TD><TD>By virtue of the continuing defaults on the payment of the outstanding principal on the $1,500,000 promissory notes issued
in August 2008, on September 30, 2009, the Company issued to the holders of the promissory notes five-year common stock purchase
warrants to purchase an aggregate of 128,820 shares of common stock exercisable at a price of $13.80 per share. The consideration
received by the Company for the issuance of the common stock purchase warrants was a deferral in the payment of principal and accrued
interest on the promissory notes.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">5.</TD><TD>On October 15, 2009, the Company granted options to three employees to purchase common stock in lieu of cash compensation.
In the aggregate, the employees received: (i) ten-year non-qualified fully vested options to purchase 1,000 shares of common stock
exercisable at $2.00 per share; and (ii) five-year non-qualified options to purchase 25,000 shares of common stock exercisable
at $2.00 per share which vest 25% on April 15, 2011 and 25% on each six month anniversary thereafter. The stock options to purchase
26,000 shares are subject to forfeiture until service conditions associated with their grant are satisfied.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">6.</TD><TD>The Company determined to use its financial resources for research and development and elected not to re-pay a promissory note
which came due in August 2009. The Company issued post-maturity or default warrants in October 2009 and November 2009. On October
31, 2009, the Company issued to the holder of the promissory note a five-year common stock purchase warrant to purchase 14,342
shares of common stock exercisable at $13.60 per share on account of the default occurring in for October 2009. On November 30,
2009, the Company issued to the holder of the promissory note a five-year common stock purchase warrant to purchase 4,385 shares
of common stock exercisable at $11.60 per share on account of the default occurring in November 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">7.</TD><TD>On November 30, 2009, the holders of $1,450,000 aggregate principal amount of the Company&rsquo;s 12% promissory notes issued
in August 2008 cancelled the amount due to them under the promissory notes in exchange for shares of the Company&rsquo;s common
stock at a price per share of $2.00. This transaction was completed on November 30, 2009 and $1,678,038 of principal and accrued
interest was exchanged for 839,003 common shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">8.</TD><TD>On January 25, 2010, the Company issued 6% Convertible Promissory Notes to a third party and James Mulvihill, a related party,
with an aggregate principal amount totaling $460,000. In March 2010, the principal and all accrued interest thereon were converted
into 231,827 shares of common stock at a rate of $2.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">9.</TD><TD>On February 2, 2010, the Company granted to Joseph Bellantoni, the Company&rsquo;s then Chief Financial Officer, Stanley Checketts,
the Company&rsquo;s then Chief Executive Officer (who remains the CEO of its wholly-owned subsidiary, Boomerang Sub, Inc.) and
Maureen Cowell, the Company&rsquo;s Secretary, options to purchase common stock in lieu of cash compensation. Ten-year non-qualified
fully-vested options to purchase an aggregate of 290,000 shares of common stock at an exercise price of $2.00 per share were issued
to these directors. These stock options are subject to forfeiture until service conditions associated with their grant are satisfied.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">10.</TD><TD>On February 2, 2010 and March 31, 2010, the Company granted to Steven C. Rockefeller, Jr., an independent director, warrants
to purchase an aggregate of 60,000 shares of common stock at an exercise price of $2.00 per share for service as a director. The
warrants have a term of 5 years.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">11.</TD><TD>From March 31, 2010 through June 2, 2010, the Company sold an aggregate of 140,000 shares of common stock at $5.00 per share
in private placements to four accredited investors for aggregate cash proceeds of $700,000. These investors also received warrants
to purchase an aggregate of 140,000 shares of common stock with an exercise price of $5.00 per share. The warrants have a term
of five years.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">12.</TD><TD>On June 1, 2010, the Company issued 140,000 shares of common stock to Mark Patterson, its Chief Executive Officer, as compensation
for employment. In addition, Mr. Patterson was issued warrants to purchase 140,000 shares of common stock at an exercise price
of $5.00 per share, which were cancelled on November 12, 2010 and replaced with warrants to purchase 280,000 shares of common stock
as described in note 18 below.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">13.</TD><TD>On July 8, 2010, the holders of an aggregate of $2,328,023 of outstanding indebtedness and obligations of the Company, all
of whom are related parties, agreed to cancel their indebtedness for common stock and common stock purchase warrants. The Company
owed J&amp;A Financing, Inc. an aggregate principal amount plus accrued interest of $1,678,304. In deferred rent, the Company owed
SB&amp;G Properties, LC $420,769 and Stan Checketts Properties $228,950. The exchange was for an aggregate of 465,605 shares of
the Company&rsquo;s common stock and an equal number of common stock purchase warrants to purchase shares of common stock, which
are exercisable for a period of five years at an exercise price of $5.00 per share. The exchange was at a rate of $5.00 for one
share of common stock and one warrant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">14.</TD><TD>On July 13, 2010, the Company completed a private placement with aggregate gross proceeds of $7,000,000. Of this amount, $1,330,000
of the securities was sold to six related parties (Burton I. Koffman, Gail Mulvihill, Mark Patterson, Venturtek, LP, Heather Mulvihill
and Peter and Ellen Mulvihill) and $5,670,000 was sold to twenty-five other accredited investors. In the offering, the Company
sold an aggregate of 1,400,000 shares of the Company&rsquo;s common stock and five-year warrants to purchase an aggregate of 1,400,000
shares of common stock at an exercise price of $5.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">15.</TD><TD>On September 7, 2010, the Company sold 50,000 shares of common stock to Mark Patterson, the Chief Executive Officer of the
Company, for aggregate gross proceeds to the Company of $250,000 under the terms of his employment agreement. This issuance of
common stock was based on a price of $5.00 per share on the date of issuance. This officer also received five-year warrants to
purchase 50,000 shares of common stock at an exercise price of $5.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">16.</TD><TD>On October 1, 2010, the Company entered into an amended and restated employment agreement with our Chief Executive Officer,
Mark Patterson. The amended agreement provides for a base salary of $200,000 per year and provides for a grant of an aggregate
of 1,080,000 five-year warrants with an exercise price of $5.00 per share that vest and become exercisable as follows: (i) 270,000
on October 1, 2010, (ii) 210,000 on each of February 1 and August 1, 2011 and February 1, 2012, and (iii) 180,000 on August 1,
2012. The amended agreement provides Mr. Patterson with a right of first refusal, pursuant to which Mr. Patterson has the right,
but not the obligation, to maintain his then pro rata share of the Company&rsquo;s issued and outstanding shares and warrants by
purchasing additional shares and warrants each time the Company offers shares and/or warrants for sale.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">17.</TD><TD>On October 6, 2010, the Company granted ten-year non-qualified, fully vested options to the Company&rsquo;s President, Christopher
Mulvihill, to purchase 200,000 shares of common stock exercisable at $5.00 per share under the terms of his employment agreement.
These stock options are subject to forfeiture until service conditions associated with their grant are satisfied.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">18.</TD><TD>On November 12, 2010, the Company issued five-year warrants to the Company&rsquo;s Chief Executive Officer Mark Patterson to
purchase 280,000 shares of the Company&rsquo;s common stock at an exercise price of $5.00 per share. These warrants were issued
in conjunction with the amendment and termination of his prior Executive employment agreement entered into during June 2010.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">19.</TD><TD>On November 24, 2010, the Company granted options to the Company&rsquo;s former Chief Operating Officer, Ryan Burleson, to
purchase common stock comprised of five-year, non-qualified, fully vested options to purchase 50,000 shares exercisable at $5.00
per share. These options were forfeited in June 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">20.</TD><TD>On November 24, 2010, the Company granted options to a consultant to purchase up to 5,000 shares of the Company&rsquo;s common
stock at an exercise price of $5.00 per share as payment for operational services. These options vest immediately and shall expire
after a period of 5 years.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">21.</TD><TD>In November 2010, the holder (Berkowitz Wolfman Associates, Inc.) of $398,012 of outstanding indebtedness, exchanged its indebtedness
for units consisting of shares of the Company&rsquo;s common stock and common stock purchase warrants. The exchange was for 79,602
shares of the Company&rsquo;s common stock and an equal number of common stock purchase warrants to purchase shares of common stock,
which are exercisable for a period of five years at an exercise price of $5.00. The exchange was at a rate of $5.00 for one share
of common stock and one warrant.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">22.</TD><TD>On November 30, 2010, the Company sold 33,329 shares of common stock at $6.00 per share in a private placement to two accredited
investors for cash proceeds of $200,000. These investors also received five year warrants to purchase 33,329 shares with an exercise
price of $6.00 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">23.</TD><TD>Between December 23, 2010 and December 29, 2010, the Company entered into a financing commitment letter (the &ldquo;Commitment
Letter&rdquo;) pursuant to which it obtained a commitment for an aggregate of up to $3,250,000 of financing to be provided, upon
demand by us, by nine accredited investors, including an aggregate of up to $1,750,000 by four related parties. Under the terms
of the Commitment Letter, each lender received one five-year warrant for every dollar such lender committed, with an exercise price
of $6.00 per share. In addition, if the Company borrows under the letter, each lender will receive additional warrants at a rate
of three warrants for each dollar drawn down from that lender's commitment, with the amount of the draw down attributable to each
lender&rsquo;s commitment to be determined on a pro rata basis.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0in">The related parties who committed
to provide financing under the letter are Mark Patterson, the Company&rsquo;s Chief Executive Officer (up to $500,000); Lake Isle
Corp., a greater than 10% holder of the Company&rsquo;s common stock, over which Gail Mulvihill, the mother of the Company&rsquo;s
President, Christopher Mulvihill, exercises sole voting and investment control (up to $750,000); HSK Funding, over which Burton
I. Koffman, a greater than 10% holder of the Company&rsquo;s common stock, exercises sole voting and investment control (up to
$250,000); and James Mulvihill, the son of Gail Mulvihill and brother of Christopher Mulvihill (up to $250,000).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">24.</TD><TD>On February 11, 2011, the Company sold 142,857 shares of common stock at $7.00 per share in private placements for cash proceeds
of $1,000,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">25.</TD><TD>In February and March 2011, the Company drew down a total of $2,166,664 on its line of credit of $3,250,000. In connection
with the draw down, the Company issued five-year warrants to purchase 325,000 shares of common stock at an exercise price of $6.00
per share, including a total of 175,000 warrants issued to four related parties.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">26</TD><TD>In May 2011, the Company drew down a total of $1,083,336 on its line of credit of $3,250,000. In connection with the draw down,
the Company issued five-year warrants to purchase 162,500 shares of common stock at an exercise price of $6.00 per share, including
a total of 87,500 warrants issued to four related parties.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">27.</TD><TD>The Company completed a private placement on December 9, 2011. There were three closings in the private placement. On November
1, 2011, the Company issued 6% convertible promissory notes due on November 1, 2016 in the aggregate principal amount of approximately
$9.4 million and warrants to purchase 2,199,902 shares of common stock. On November 1, 2011, the Notes were convertible into an
initial aggregate amount of 2,199,902 shares of Common Stock. On November 1, 2011, the Company paid a placement agent a cash fee
of $137,306 for its services as placement agent and issued to the placement agent warrants to purchase 61,177 shares of Common
Stock. On November 18, 2011, the Company issued 6% convertible promissory notes due on November 1, 2016 in the aggregate principal
amount of approximately $1.35 million and warrants to purchase 317,652 shares of common stock. On November 18, 2011, the Notes
were convertible into an initial aggregate amount of 317,652 shares of Common Stock. On November 18, 2011, the Company paid a placement
agent a cash fee of $59,883 for its services as placement agent and issued to the placement agent warrants to purchase 27,293 shares
of Common Stock. The notes and warrants have a term of five year term. On December 9, 2011, the Company issued 6% convertible promissory
notes due on November 1, 2016 in the aggregate principal amount of $925,000 and warrants to purchase 217,652 shares of common stock.
On December 9, 2011, the Notes were convertible into an initial aggregate amount of 217,652 shares of Common Stock. On December
9, 2011, the Company paid a placement agent a cash fee of $46,800 for its services as placement agent and issued to the placement
agent warrants to purchase 20,706 shares of Common Stock. The notes and warrants have a term of five year term. The exercise price
of the warrant and the conversion price of the note is $4.25, subject to adjustment. In connection with the private placement,
the Company received cash proceeds of approximately $5.0 million and refinanced approximately $6.6 million of then existing short-term
indebtedness.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">28.</TD><TD>In March 2012, the Company issued an aggregate amount of 25,484 shares to the holders of the 6% convertible promissory notes
due 2016 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $108,229.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">29.</TD><TD>In April 2012, the Company granted to David Koch, Chief Operating Officer of the Company, 11,765 shares of restricted stock
pursuant to his employment agreement with the Company.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">30.</TD><TD>In June 2012, the Company issued an aggregate amount of 40,925 shares to the holders of the 6% convertible promissory notes
due 2016 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $173,890.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">31.</TD><TD>In June 2012, the Company issued an aggregate amount of 2,795 shares to the holders of the 6% convertible promissory notes
due 2017 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $13,151.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">32.</TD><TD>The Company completed a private placement on July 13, 2012. There were two closings in the private placement. On June 14, 2012,
the Company issued 6% convertible promissory notes due on June 14, 2017 in the aggregate principal amount of $5.0 million and warrants
to purchase 1,000,000 shares of common stock. On June 14, 2012, the Notes were convertible into an initial aggregate amount of
1,000,000 shares of Common Stock. On June 14, 2012, the Company paid a placement agent and registered broker-dealer a cash fee
of $267,302 for services and issued to the placement agent warrants to purchase 41,700 shares of Common Stock. On July 13, 2012,
the Company issued 6% convertible promissory notes due 2017 in the aggregate principal amount of $1.2 million and warrants to purchase
240,000 shares of common stock. On July 13, 2012, the Notes were convertible into an initial aggregate amount of 240,000 shares
of Common Stock. On July 13, 2012, the Company paid a placement agent and a registered broker-dealer a cash fee of approximately
$79,375 for its services and issued to the placement agent warrants to purchase 13,100 shares of Common Stock. The notes and warrants
expire on June 14, 2017. The notes and warrants terminate on June 14, 2017. The exercise price of the warrant and the conversion
price of the note is $5.00, subject to adjustment. In connection with the private placement, the Company received cash proceeds
of approximately $5.5 million.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The securities sold described above were
sold upon the exemption from the registration requirements of the Securities Act of 1933, as amended, upon reliance on Section
4(2) thereof and/or regulation D promulgated thereunder. No underwriters were employed in any of these transactions. A placement
agent was paid a fee as described in item 27 and 29. 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.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Item 16. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
and Financial Statement Schedules</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exhibit<BR>
 Number</B></P></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt">
</TD>
    <TD STYLE="width: 88%; text-align: center; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exhibits
        and Financial Statement Schedules</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Incorporation of Registrant, as amended(15)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>Second Amendment and Restated By-laws of Registrant (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>Specimen Common Stock Certificate, $0.001 par value(1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1*</TD>
    <TD>&nbsp;</TD>
    <TD>Opinion of Blank Rome LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 12% Promissory Note due August 14 and 20, 2009 (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant to Purchase Common Stock expiring August 2013 (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between NYC Skyline Realty LLC and Boomerang Systems, Inc. dated as of January 1, 2009. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Common Stock Purchase Warrant issued and to be issued with respect to payment defaults on our 12% Promissory Notes (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Agreement used to exchange 12%&nbsp;&nbsp;promissory notes for shares of common stock (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of August 21, 2010 (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.10</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Executive Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of October 1, 2010 (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between SB&amp;G Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008, and Amendment No. 2 thereto dated March 15, 2010 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between Stan Checketts Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008 and Amendment No. 2 thereto dated March 15, 2010 (10)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">10.13</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 86%">Ground lease by and between Route 94 Development Corporation and Boomerang Systems, Inc. dated as of April 30, 2010 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>Revolving Promissory Note between Sail Energy, LLC and Boomerang Systems, Inc. dated as of May 14, 2010 and Amendment No. 1 thereto dated as of December 15, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.15</TD>
    <TD>&nbsp;</TD>
    <TD>Loan agreement by and between SB&amp;G Properties and Zions First National Bank and Guaranty of such loan provided by Boomerang Systems, Inc dated July 9, 2007. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note dated May 1, 2008 between Boomerang Sub, Inc. and J and A Financing and Amendment thereto dated July 15, 2008 and modification thereto dated February 9, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.17</TD>
    <TD>&nbsp;</TD>
    <TD>Assignment of deposit account by and between J and A Financing, Inc. Boomerang Systems, Inc. and Highlands State Bank dated May 16, 2010 and confirmation of payment dated July 21, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>&nbsp;</TD>
    <TD>Loan assumption agreement Between Boomerang Systems, Inc. and J and A Financing, Inc. dated July 6, 2010.&nbsp;&nbsp;(10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.19</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note between James Mulvihill and Boomerang Systems, Inc. and conversion agreement dated March 29, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>&nbsp;</TD>
    <TD>Non-Compete Agreement by and between Stan Checketts and Digital Imaging Resources, Inc. dated December 10, 2007 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>&nbsp;</TD>
    <TD>Line of Credit in favor of Boomerang Systems, Inc. with Highlands State Bank, dated June 30, 2011 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>&nbsp;</TD>
    <TD>Commitment letter dated December 29, 2010, by and between Boomerang Systems, Inc. and the lenders signatory thereto. (12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc. and the lenders signatory thereto. (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Note issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc., and the lenders signatory thereto. (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Highlands State Bank, dated August 4, 2011 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>&nbsp;</TD>
    <TD>Chris Mulvihill employment agreement dated March 31, 2008 and amendment #1 dated October 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.27</TD>
    <TD>&nbsp;</TD>
    <TD>Ground Lease with Route 94, dated April 30, 2010 (12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.28</TD>
    <TD>&nbsp;</TD>
    <TD>Equipment Lease with M&amp;T Bank, dated September 1, 2007 and personal guarantees of the lease (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.29</TD>
    <TD>&nbsp;</TD>
    <TD>Boomerang loans with third party bank, due in May 2011, J and A assumption of Boomerang loans, and conversion of J and A debt to common stock (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.30</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Gail Mulvihill, dated April 8, 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.31</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Venturetek, dated July 9, 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.32</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 6% Convertible Subordinate Note due 2016 (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.33</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.34</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Placement Agent Warrant (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.35</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (13)</TD></TR>
</TABLE>
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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">10.36</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 86%">Form of Subscription Agreement (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.37</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement between David K. Koch and Boomerang Systems, Inc., dated as of October 28, 2011 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.38</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 21, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.39</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 22, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.40</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 26, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.41</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 29, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.42</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Mark R. Patterson and Boomerang Systems, Inc. dated November 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.43</TD>
    <TD>&nbsp;</TD>
    <TD>Third Amendment to the Lease between Stan Checketts Properties, L.C. and Boomerang Sub, Inc. dated October 28, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.44</TD>
    <TD>&nbsp;</TD>
    <TD>Third Amendment to the Lease between SB&amp;G Properties, LC and Boomerang Sub, Inc. dated October 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.45</TD>
    <TD>&nbsp;</TD>
    <TD>Lease between Thirty Vreeland Associates, L.L.C. and Boomerang Systems, Inc. dated December 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.46</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Lake Isle Corporation and Boomerang Systems, Inc. dated October 28, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.47</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Atlantic &amp; Madison of NJ&nbsp; Corp. and Boomerang Systems, Inc. dated October 31, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.48</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 6% Convertible Subordinate Note due 2017 (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.49</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.50</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Placement Agent Warrant (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.51</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.53</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.54</TD>
    <TD>&nbsp;</TD>
    <TD>Joint Venture Agreement between Boomerang MP Holdings and Stokes Industries *</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>Code of Ethics (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>Subsidiaries of the Registrant as of September 30, 2011 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1*</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Blank Rome LLP (included in exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2*</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Liebman Goldberg &amp; Hymowitz, LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>Power of Attorney (included on signature page)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101</TD>
    <TD>&nbsp;</TD>
    <TD>The following materials from Boomerang System, Inc.&rsquo;s Registration Statement on Form S-1 formatted in extensible Business Reporting Language (XBRL): (i) Unaudited, Consolidated Statements of Operations for the Nine Months Ended June 30, 2012 and 2011, (ii) Unaudited, Consolidated Balance Sheets as of June 30, 2012 and September 30, 2011, (iii) Unaudited, Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2012 and 2011, (iv) Notes to Unaudited, Consolidated Financial Statements; (v) Consolidated Statements of Operations for the Years Ended September 31, 2011 and 2010, (vi) Consolidated Balance Sheets as of September 30, 2011 and 2010, (vii) Consolidated Statements of Cash Flows for the Years Ended September 30, 2011 and 2010, (viii) Consolidated Statements of Stockholders&rsquo; Equity (Deficit) for the Years Ended September 39, 2010, 2009 and 2008 and (ix) Notes to Consolidated Financial Statements.***</TD></TR>
</TABLE>
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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended
September 30, 2011.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>Incorporated by reference from an exhibit filed with Quarterly Report on Form 10-Q for quarter ended December 31, 2009.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s annual report Form 10-K/A for the fiscal year ended
September 30, 2008.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K/A for the fiscal year ended
September 30, 2008.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended
September 30, 2009.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(6)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on October 27, 2009</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(7)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on December 21, 2009</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(8)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K/A filed on August 26, 2010</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(9)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on October 7, 2010</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(10)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended
September 30, 2010.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(11)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q/A for the quarter ended
June 30, 2011 filed on September 14, 2011.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(12)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q/A for the quarter ended
June 30, 2011 filed on December 16, 2011.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(13)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s current report Form 8-K filed on December 15, 2011.</TD></TR></TABLE>

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<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(14)</TD><TD>Incorporated by reference from an amendment as an exhibit filed with the Company&rsquo;s Current Report on Form 8-K filed December
28, 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(15)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2012 filed on August 14, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(16)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s Registration Statement on Form S-1 (file no. 333-179226)
filed on January 27, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(17)</TD><TD>Incorporated by reference from an exhibit filed with the Company&rsquo;s Current Report on Form 8-K filed on July 18, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">*</TD><TD>Filed herewith</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">**</TD><TD>Pursuant to Rule 406T of Regulation S-T, the interactive data files included in Exhibit 101 are deemed not filed or part of
a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed
not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability
under those sections.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Item 17. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undertakings</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (&sect;230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(2) That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(3) To remove from registration by means
of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(4) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(5) For purposes of determining any liability
under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(6) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SIGNATURES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Florham Park, State of New Jersey, on&nbsp;September 14, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">BOOMERANG SYSTEMS, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="width: 46%; border-bottom: Black 1pt solid">/s/Mark Patterson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Mark Patterson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>(Principal Executive Officer)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below hereby constitutes and appoints Mark Patterson and Christopher Mulvihill, and each or any
of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign this Registration Statement, and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes,
may lawfully do or cause to be done by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%; font-weight: bold; text-align: center; text-decoration: none; border-bottom: Black 1pt solid">Signature</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 50%; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Title</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 23%; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Mark Patterson</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Chief Executive Officer (Principal Executive</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Mark Patterson</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Officer) and Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Scott Shepherd</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Chief Financial Officer (Principal Financial and</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Scott Shepherd</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Accounting Officer)</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Joseph R. Bellantoni</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Joseph R. Bellantoni</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Maureen Cowell</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Maureen Cowell</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Stanley Checketts</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Stanley Checketts</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Steven C.&nbsp; Rockefeller, Jr.</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Steven C. Rockefeller, Jr.</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Kevin Cassidy</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Kevin Cassidy</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold; text-decoration: none">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Anthony P Miele, III</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Anthony P. Miele, III</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none; border-bottom: Black 1pt solid">/s/Christopher Mulvihill</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">September 14, 2012&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-decoration: none">Christopher Mulvihill</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Exhibit Index</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exhibit Number</B></P></TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt">
</TD>
    <TD STYLE="width: 90%; text-align: left; vertical-align: bottom; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exhibits and Financial Statement
        Schedules</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Incorporation of Registrant, as amended(15)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>Second Amendment and Restated By-laws of Registrant (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>Specimen Common Stock Certificate, $0.001 par value(1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1*</TD>
    <TD>&nbsp;</TD>
    <TD>Opinion of Blank Rome LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 12% Promissory Note due August 14 and 20, 2009 (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant to Purchase Common Stock expiring August 2013 (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between NYC Skyline Realty LLC and Boomerang Systems, Inc. dated as of January 1, 2009. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp. (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Common Stock Purchase Warrant issued and to be issued with respect to payment defaults on our 12% Promissory Notes (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Agreement used to exchange 12%&nbsp;&nbsp;promissory notes for shares of common stock (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of August 21, 2010 (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.10</TD>
    <TD>&nbsp;</TD>
    <TD>Amended and Restated Executive Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of October 1, 2010 (9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between SB&amp;G Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008, and Amendment No. 2 thereto dated March 15, 2010 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>&nbsp;</TD>
    <TD>Lease agreement by and between Stan Checketts Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008 and Amendment No. 2 thereto dated March 15, 2010 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.13</TD>
    <TD>&nbsp;</TD>
    <TD>Ground lease by and between Route 94 Development Corporation and Boomerang Systems, Inc. dated as of April 30, 2010 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>Revolving Promissory Note between Sail Energy, LLC and Boomerang Systems, Inc. dated as of May 14, 2010 and Amendment No. 1 thereto dated as of December 15, 2010. (10)</TD></TR>
</TABLE>
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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.15</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Loan agreement by and between SB&amp;G Properties and Zions First National Bank and Guaranty of such loan provided by Boomerang Systems, Inc dated July 9, 2007. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note dated May 1, 2008 between Boomerang Sub, Inc. and J and A Financing and Amendment thereto dated July 15, 2008 and modification thereto dated February 9, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.17</TD>
    <TD>&nbsp;</TD>
    <TD>Assignment of deposit account by and between J and A Financing, Inc. Boomerang Systems, Inc. and Highlands State Bank dated May 16, 2010 and confirmation of payment dated July 21, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>&nbsp;</TD>
    <TD>Loan assumption agreement Between Boomerang Systems, Inc. and J and A Financing, Inc. dated July 6, 2010.&nbsp;&nbsp;(10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.19</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note between James Mulvihill and Boomerang Systems, Inc. and conversion agreement dated March 29, 2010. (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>&nbsp;</TD>
    <TD>Non-Compete Agreement by and between Stan Checketts and Digital Imaging Resources, Inc. dated December 10, 2007 (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>&nbsp;</TD>
    <TD>Line of Credit in favor of Boomerang Systems, Inc. with Highlands State Bank, dated June 30, 2011 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>&nbsp;</TD>
    <TD>Commitment letter dated December 29, 2010, by and between Boomerang Systems, Inc. and the lenders signatory thereto. (12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc. and the lenders signatory thereto. (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Note issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc., and the lenders signatory thereto. (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Highlands State Bank, dated August 4, 2011 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>&nbsp;</TD>
    <TD>Chris Mulvihill employment agreement dated March 31, 2008 and amendment #1 dated October 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.27</TD>
    <TD>&nbsp;</TD>
    <TD>Ground Lease with Route 94, dated April 30, 2010 (12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.28</TD>
    <TD>&nbsp;</TD>
    <TD>Equipment Lease with M&amp;T Bank, dated September 1, 2007 and personal guarantees of the lease (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.29</TD>
    <TD>&nbsp;</TD>
    <TD>Boomerang loans with third party bank, due in May 2011, J and A assumption of Boomerang loans, and conversion of J and A debt to common stock (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.30</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Gail Mulvihill, dated April 8, 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.31</TD>
    <TD>&nbsp;</TD>
    <TD>Promissory Note with Venturetek, dated July 9, 2010 (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.32</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 6% Convertible Subordinate Note due 2016 (13)</TD></TR>
</TABLE>
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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.33</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Form of Warrant (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.34</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Placement Agent Warrant (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.35</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.36</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.37</TD>
    <TD>&nbsp;</TD>
    <TD>Employment Agreement between David K. Koch and Boomerang Systems, Inc., dated as of October 28, 2011 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.38</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 21, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.39</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 22, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.40</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 26, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.41</TD>
    <TD>&nbsp;</TD>
    <TD>Loan dated September 29, 2011, by and between Boomerang Systems, Inc., and Atlantic &amp; Madison of NJ Corp. (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.42</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Mark R. Patterson and Boomerang Systems, Inc. dated November 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.43</TD>
    <TD>&nbsp;</TD>
    <TD>Third Amendment to the Lease between Stan Checketts Properties, L.C. and Boomerang Sub, Inc. dated October 28, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.44</TD>
    <TD>&nbsp;</TD>
    <TD>Third Amendment to the Lease between SB&amp;G Properties, LC and Boomerang Sub, Inc. dated October 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.45</TD>
    <TD>&nbsp;</TD>
    <TD>Lease between Thirty Vreeland Associates, L.L.C. and Boomerang Systems, Inc. dated December 1, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.46</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Lake Isle Corporation and Boomerang Systems, Inc. dated October 28, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.47</TD>
    <TD>&nbsp;</TD>
    <TD>Loan Agreement between Atlantic &amp; Madison of NJ&nbsp; Corp. and Boomerang Systems, Inc. dated October 31, 2011. (16)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.48</TD>
    <TD>&nbsp;</TD>
    <TD>Form of 6% Convertible Subordinate Note due 2017 (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.49</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Warrant (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.50</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Placement Agent Warrant (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.51</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (17)</TD></TR>
</TABLE>
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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">10.53</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%">Form of Subscription Agreement (17)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.54</TD>
    <TD>&nbsp;</TD>
    <TD>Joint Venture Agreement between Boomerang MP Holdings and Stokes Industries *</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>Code of Ethics (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>Subsidiaries of the Registrant as of September 30, 2011 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1*</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Blank Rome LLP (included in exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2*</TD>
    <TD>&nbsp;</TD>
    <TD>Consent of Liebman Goldberg &amp; Hymowitz, LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>Power of Attorney (included on signature page)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101</TD>
    <TD>&nbsp;</TD>
    <TD>The following materials from Boomerang System, Inc.&rsquo;s Registration Statement on Form S-1 formatted in extensible Business Reporting Language (XBRL): (i) Unaudited, Consolidated Statements of Operations for the Nine Months Ended June 30, 2012 and 2011, (ii) Unaudited, Consolidated Balance Sheets as of June 30, 2012 and September 30, 2011, (iii) Unaudited, Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2012 and 2011, (iv) Notes to Unaudited, Consolidated Financial Statements; (v) Consolidated Statements of Operations for the Years Ended September 31, 2011 and 2010, (vi) Consolidated Balance Sheets as of September 30, 2011 and 2010, (vii) Consolidated Statements of Cash Flows for the Years Ended September 30, 2011 and 2010, (viii) Consolidated Statements of Stockholders&rsquo; Equity (Deficit) for the Years Ended September 39, 2010, 2009 and 2008 and (ix) Notes to Consolidated Financial Statements.***</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended September 30,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with Quarterly Report on Form 10-Q for quarter ended December 31, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s annual report Form 10-K/A for the fiscal year ended September 30, 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K/A for the fiscal year ended September 30,
2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended September 30,
2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on October 27, 2009</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on December 21, 2009</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(8)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K/A filed on August 26, 2010</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s current report on Form 8-K filed on October 7, 2010</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(10)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s annual report on Form 10-K for the fiscal year ended September 30,
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(11)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2011
filed on September 14, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(12)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2011
filed on December 16, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(13)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s current report Form 8-K filed on December 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(14)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an amendment as an exhibit filed with the Company&rsquo;s Current Report on Form 8-K filed December 28, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(15)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed
on August 14, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(16)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s Registration Statement on Form S-1 (file no. 333-179226) filed on January
27, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(17)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
by reference from an exhibit filed with the Company&rsquo;s Current Report on Form 8-K filed on July 18, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">*</TD><TD>Filed herewith</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Rule 406T of Regulation
S-T, the interactive data files included in Exhibit 101 are deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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</HTML>
[{"type": "S-1", "sequence": "1", "filename": "v323121_s1.htm", "description": "S-1", "secsgml_size_bytes": 1515347}]
{"company-data": {"conformed-name": "Boomerang Systems, Inc.", "cik": "0000314712", "assigned-sic": "3510", "irs-number": "222306487", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-183904", "film-number": "121092335"}, "business-address": {"street1": "355 MADISON AVE", "city": "MORRISTOWN", "state": "NJ", "zip": "07960", "phone": "973-538-1194"}, "mail-address": {"street1": "355 MADISON AVE", "city": "MORRISTOWN", "state": "NJ", "zip": "07960"}, "former-company": [{"former-conformed-name": "DIGITAL IMAGING RESOURCES INC.", "date-changed": "20051005"}, {"former-conformed-name": "DOMINION RESOURCES INC /DE/", "date-changed": "19960109"}, {"former-conformed-name": "NORTHERN ARIZONA GOLD & SILVER MILLING & MINING CO INC", "date-changed": "19820518"}]}
As filed with the Securities and Exchange
Commission on September 14, 2012
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
_______________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
BOOMERANG SYSTEMS, INC.
(
Exact name of registrant as specified
in its charter
)
Delaware
3510
22-2306487
(State or other jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer
incorporation or organization)
Classification Code Number)
Identification No.)
30 B Vreeland Road
Florham Park, New Jersey 07932
(973) 538-1194
(Address, including zip code and telephone
number, including area code, of Registrant's principal executive offices)
Mark Patterson
Chief Executive Officer
30 B Vreeland Road
Florham Park, New Jersey 07932
(973) 538-1194
(Name, address, including zip code and
telephone number, including area code, of agent for service)
Copies to:
Robert J. Mittman
Brad L. Shiffman
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
Telephone: (212) 885-5442
Facsimile: (212) 885-5001
Approximate date of commencement of
proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
þ
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
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.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
þ
Calculation of Registration Fee
Title of Each Class
of Securities to be
Registered
Amount to be
Registered
Proposed Maximum
Offering Price Per
Share(1)
Proposed Maximum
Aggregate Offering
Price
Amount of
Registration Fee
Convertible Notes
$
6,200,000
-
$
6,200,000
$
706.80
Warrants
1,240,000 (1)
-
-
-
(3)
Common stock issuable upon conversion of the convertible notes
1,240,000 (1)
-
-
-
(2)
Common stock issuable upon exercise of warrants
1,240,000 (1)
$
6.00
$
7,440,000
$
848.16
Warrants
54,800 (1)
-
-
-
(4)
Common stock issuable upon exercise of warrants
54,800 (1)
$
6.00
$
328,800
$
37.48
Additional shares of Common Stock issuable with respect to warrants and notes(4)
506,960
$
6.00
$
3,041,760
$
346.76
Total
$
17,010,560
$
1,949.31
(1)
Pursuant to Rule 416 under the Securities Act, there are also being registered hereby such additional indeterminate number
of securities as may become issuable pursuant to terms which provide for a change in the amount of securities being offered or
issued to prevent dilution resulting from stock splits, stock dividends, or similar transactions.
(2)
No additional consideration will be received by us for the Common Stock issuable upon conversion of the Notes. Pursuant to
Rule 457(i) under the Securities Act, no additional registration fee is required in connection with the registration of the common
stock issuable upon conversion of the Notes.
(3)
Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required with respect to the warrants as
they are being registered in the same registration statement as the Common Stock to be offered pursuant thereto.
(4)
Estimated number of additional shares which may be issued as a result of conversion or exercise price anti-dilution adjustments,
interest payments on the notes, stock dividends, stock splits, recapitalization and similar events applicable to the notes and
warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in this prospectus is not complete
and may be changed.  We may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER
14, 2012
PRELIMINARY PROSPECTUS
Up to $6,200,000 aggregate principal
amount of 6% convertible notes due 2017 and warrants to purchase up to 1,294,800 shares of common stock and shares of common stock
issuable upon conversion of the notes and the warrants
BOOMERANG SYSTEMS, INC.
We issued $6,200,000 aggregate principal
amount of our 6% convertible notes due 2017, referred to as the notes, and warrants to purchase 1,240,000 shares of our common
stock in a private placement. In connection with the private placement, we also issued to the placement agent, warrants to purchase
54,800 shares of our common stock. The warrants issued to the investors and the placement agent are referred to collectively as
the warrants. The selling securityholders identified in this prospectus may use this prospectus to resell the notes, warrants and
shares of common stock issuable upon conversion of the notes or exercise of the warrants. We will not receive any of the proceeds
from the securities sold by these selling securityholders. We will, however, receive the exercise price from the exercise of warrants
to the extent the cashless exercise provision is not utilized. We have also registered for resale by the selling security holders
up to an additional 506,960 shares of common stock in the event of anti-dilution adjustments to the conversion or exercise price
of the notes or warrants, interest payments on the notes in shares, stock dividends, stock splits, recapitalizations or similar
events.
The notes are initially convertible into
common stock at $5.00 per share, subject to adjustment. The notes are due on June 14, 2017. Interest accrues on the Notes at 6%
per annum. Interest is payable quarterly, commencing on June 30, 2012, with respect to the notes issued in June 2012, and September
30, 2012, with respect to the notes issued in July 2012, at the Company's option, interest may be payable in: (i) cash or
(ii) shares of the common stock, as described in this prospectus. The outstanding principal amount of the notes and accrued and
unpaid interest thereon will automatically convert into a number of shares of common stock determined by dividing the outstanding
principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in effect on the mandatory conversion
date, as described in this prospectus.
The warrants are exercisable at $5.00 per
share, subject to adjustment. Cashless exercise is permitted if the average trading volume of our common stock during at least
five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise is at least 10,000 shares,
and will be based upon the average of the last sale price of the common stock during the five (5) consecutive trading days prior
to the notice of exercise. In certain instances, a holder is not permitted to exercise the warrant if such exercise would result
in such holder's total ownership of our common stock exceeds 4.9%. The warrants expire on June 14, 2017.
There is presently only a limited market
for our common stock and no public market for our notes and warrants. We do not intend to apply for listing of the notes or warrants
on any national securities exchange or for the quotation of the notes or warrants through any automated quotation system. The public
offering price for the warrants will be $2.26 per warrant. In calculating this price, we used the Black-Scholes option pricing
model, which utilizes inputs such as the closing price of our common stock, exercise price of the warrants, assumed dividend yield,
assumed risk-free interest rate, expected volatility and expected term. The public offering price for the notes will be the principal
amount of the note.
Our common stock is quoted on the OTCQB
tier of the OTC Markets under the symbol "BMER." The last closing bid price of our common stock on September 12, 2012
was $3.80 per share. The initial public offering price for the common stock will be $6.00 per share until the shares of common
stock are quoted on a national securities exchange or the OTC Bulletin Board at which time the shares of common stock will be
sold at prevailing market prices or at privately negotiated prices. There can be no assurance our common stock will be quoted
on a national securities exchange or the OTC Bulletin Board.
These are speculative securities. Investing
in these securities involves significant risks. You should purchase these securities only if you can afford a complete loss of
your investment. See "Risk Factors" beginning on page 5.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus.  Any representation to the contrary is a criminal offense.
The date of this prospectus is
, 2012.
TABLE OF CONTENTS
PAGE
ABOUT THIS PROSPECTUS
ii
PROSPECTUS SUMMARY
1
THE OFFERING
3
RISK FACTORS
4
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
20
USE OF PROCEEDS
22
DIVIDEND POLICY
22
MARKET FOR COMMON EQUITY
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
24
OUR BUSINESS
37
MANAGEMENT
50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
63
SELLING SECURITYHOLDERS
67
PLAN OF DISTRIBUTION
73
DESCRIPTION OF SECURITIES
75
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
85
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
95
LEGAL MATTERS
95
EXPERTS
95
WHERE YOU CAN FIND MORE INFORMATION
95
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
i
ABOUT THIS PROSPECTUS
You should rely only on the information
contained in this prospectus we have authorized for use with respect to this offering. We have not authorized anyone to provide
you with different or additional information.  If anyone provides you with different or additional information, you should
not rely on it. You should not assume that the information in this prospectus is accurate or complete as of any date other than
the dates of the applicable documents.  Our business, financial condition, liquidity, results of operations and prospects
may have changed since those dates. This prospectus is not an offer to sell or the solicitation of an offer to buy these securities
in any jurisdiction where offers or sales are not permitted.
It is important for you to read and consider
all of the information contained in this prospectus before making your investment decision.  See "Where You Can
Find More Information" in this prospectus for instructions on how you can access additional information.
Unless the context requires otherwise, or
unless otherwise noted, all references to the "Company," "we," "our," or "us" refer
collectively to Boomerang Systems, Inc. and its consolidated subsidiaries.
On June 20, 2011, we effected a 1-for-20
reverse stock split. All share numbers included in this prospectus are post reverse stock split.
ii
PROSPECTUS SUMMARY
The following summary highlights
selected information contained in this prospectus.  Because it is a summary, it does not contain all the information
you should consider before investing in our securities.  Before making any investment decision, you should read the entire
prospectus carefully, including the "Risk Factors" section of this prospectus beginning on page 5, and the financial
statements and notes to the financial statements beginning on page F-1.
The Company
Our company, Boomerang Systems, Inc., is
engaged in the business of marketing, designing, engineering, manufacturing, installing and supporting its own line of fully automated
parking systems and fully automated self storage systems, with corporate and sales offices in Florham Park, New Jersey, and a research,
design, production and testing center in Logan, Utah.
Boomerang entered the business of automation
by developing and marketing automated self-storage systems to provide the space efficiency, security, and convenience of 100% "drive-up
accessible" vertical self-storage in densely populated urban locations with high real estate values. This system, which we
refer to as Boomerang's Automated Locker Retrieval System, stores steel storage containers in a steel rack system with a
central open atrium and shuttles that move along a rail (i.e., "rack & rail") transport containers back and forth
between storage locations and ground floor loading bays.
While promoting our self storage system,
we received numerous inquiries to provide space-saving automated parking systems. In 2007, we began to develop automated parking
systems to expand our product line and enter that business. While we believe the automated self-storage has significant potential,
we believe the demand for automated parking systems is substantially larger.
To serve this market, we have developed
two automated parking product lines, which we refer to as "rack & rail" systems and "RoboticValet™"
systems. While our rack & rail systems compete with other rail or track based automated parking systems offered by other automated
parking providers, we believe that our RoboticValet system is unique in the marketplace with distinct advantages over other systems
historically offered by competitors.
Since emerging from a business development
stage company in 2008, we have had negative working capital and an annual net loss. We had a net loss of $19,102,004 in fiscal
2011 and a net loss of $13,378,735 in the third quarter of fiscal 2012. As of the end of fiscal 2011, we had an accumulated deficit
of $52,812,498 and as of the end of the third quarter of fiscal 2012, we had an accumulated deficit of $66,191,233. Losses are
continuing to date and are expected to continue into the future until such time as we are able to generate meaningful sales of
our systems.
Our corporate offices are located at 30
B Vreeland Road, Florham Park, New Jersey 07932, where our telephone number is (973) 538-1194.
Private Placement of Notes and Warrants
In June and July 2012, we issued to subscribers
6% convertible promissory notes due 2017 in the aggregate principal amount of $6.2 million and warrants to purchase 1,240,000 shares
of common stock in a private placement, which expire on June 14, 2017. In connection with the private placement, we received cash
proceeds of approximately $5.5 million. For each $100,000 invested, a subscriber was issued a $100,000 principal amount note and
warrants to purchase 20,000 shares of our common stock. See "Description of Securities" for a description of the terms
of the Notes and Warrants.
In connection with the private placement,
we paid Gilford Securities Incorporated, an aggregate cash fee of approximately $299,000 for its services as placement agent. We
issued warrants to Gilford Securities Incorporated warrants to purchase an aggregate of 54,800 shares of common stock. These warrants
expire five years from the respective date of issuance and contain substantially the same terms as those issued to subscribers.
In connection with the private placement, we also paid a registered broker-dealer an aggregate amount of $54,000 for its services
in connection with the private placement.
We also entered into a registration rights
agreement with the subscribers and the placement agent. Pursuant to the registration rights agreement, we agreed to file a registration
statement within 90 days after the closing date of the offering to register for resale or the notes, the warrants, the shares of
common stock issuable upon conversion of the notes and exercise of the warrants (collectively, referred to as the Registrable Securities).
In the event that the SEC limits the number of Registrable Securities that may be included in the registration statement, we shall
include only those Registrable Securities permitted by the Securities and Exchange Commission, or SEC, and shall file additional
registration statements at the earliest practicable date as we are permitted to do so in accordance with SEC guidelines. We shall
use our best efforts to cause (i) the Registration Statement to be effective within 150 days of the offering, and (ii) any additional
registration statements to be declared effective within 90 days of the required filing date.
In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Securities
an amount equal to 1% of the original principal amount of the investor's note, multiplied by a fraction with the numerator
equal to the number of Registrable Securities that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the notes and exercise of the warrants purchased pursuant
to the subscription agreement and owned by such holder.
2
THE OFFERING
Convertible Notes due 2017 Offered for Resale by the Selling Securityholders
$6.2 million aggregate principal amount of the 6% convertible notes due 2017 which are currently convertible into 1,240,000 shares of our common stock.
Warrants Offered for Resale by the Selling Securityholders
Warrants to purchase 1,294,800 shares of our common stock.
Shares of Common Stock Offered for Resale by the Selling Securityholders(1)
2,480,000, assuming conversion of the entire principal amount of the notes and exercise of all the warrants.
Additional number of Shares of Common Stock that may be Offered for Resale by the Selling Securitiyholders in the Event of Anti-dilution Adjustments to the Notes and Warrants, Interest Payments on the notes, Stock Dividends, Stock Splits, Recapitalization and similar events
506,960, assuming conversion of the entire principal amount of the notes and exercise of all of the warrants and there has been an anti-dilution adjustment to the conversion and exercise price or interest payments in stock on the notes, a stock dividend, stock splits, recapitalization or similar event.
Summary of the Notes
The notes are initially convertible into common stock at $5.00 per share, subject to adjustment.  The notes are due on June 14, 2017.  Interest accrues on the Notes at 6% per annum.  Interest is payable quarterly, commencing on June 30, 2012 with respect to the notes issued in June 2012 and September 30, 2012 with respect to the notes issued in July 2012, at the Company's option, interest may be payable in: (i) cash or (ii) shares of the common stock, as described in this prospectus.  The outstanding principal amount of the notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined by dividing the outstanding principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in effect on the mandatory conversion date, as described in this prospectus.
Summary of the Warrants
The warrants are exercisable at $5.00 per share, subject to adjustment.  Cashless exercise is permitted if the average trading volume of our common stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise.  In certain instances, a holder is not be permitted to exercise the warrant if such exercise would result in such holder's total ownership of our common stock exceeds 4.9%.  The warrants expire on June 14, 2017.
3
Use of Proceeds
We will not receive any proceeds from the sale of the securities offered by the selling securityholders, except that we may receive the exercise price from the exercise of the warrants to purchase common stock for the underlying common stock to the extent the cashless exercise provision contained in the warrant is not utilized.  We intend to use any proceeds we may receive from the cash exercise of the warrants for working capital and other general corporate purposes.  See "Use of Proceeds."
(1)
The number of shares of our common stock outstanding was 7,399,086
shares on September 13, 2012. Unless otherwise indicated,
the number of outstanding shares of common stock presented in this prospectus excludes:  1,240,000 shares of our common
stock issuable upon the conversion of the notes and 1,294,800 shares of our common stock issuable upon the exercise of the warrants;
506,960 shares of our common stock that may be offered under this prospectus in the event of anti-dilution adjustments to the conversion
or exercise price of the notes or warrants, interest payments on the notes in shares, stock dividends, stock splits, recapitalizations
or similar events; and 10,807,157
shares of our common stock issuable upon conversion, exchange or exercise in respect of
outstanding options, other notes, other warrants and other securities.
Risk Factors
Investing in our securities involves a high
degree of risk.  You should carefully consider the information under "Risk Factors" beginning on page 5 before
investing in our securities.
4
RISK FACTORS
In addition to the other information
included in this prospectus and any prospectus supplement, the following factors should be carefully considered in evaluating an
investment in our securities, our business, financial condition, results of operations, and future prospects.  Any of
the following risks, either alone or taken together, could materially and adversely affect our business, financial condition, results
of operations, or future prospects.  If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, our actual results may be materially adversely affected. There may be additional risks that
we do not presently know or that we currently believe are immaterial which could also materially adversely affect our business,
financial condition, results of operations, or future prospects. In any such case, the value of our securities could decline substantially
and you could lose all or a part of your investment.
Risks Related to Our Business
Our increased indebtedness may
harm our financial condition and results of operations.
As of September 30, 2011, our total consolidated
long-term debt was approximately $6.2 million and as of June 30, 2012, our total long-term debt was approximately $17.7 million.
Since then, we have incurred approximately an additional $1.2 million of long-term debt from related party loans and a private
offering. Our level of indebtedness could have important consequences to us and you, including:
·
it could adversely affect our ability to satisfy our obligations;
·
an increased portion of our cash flows from operations may have to be dedicated to interest and principal payments and may
not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;
·
it may impair our ability to obtain additional financing in the future;
·
it may limit our flexibility in planning for, or reacting to, changes in our business and industry; and
·
it may make us more vulnerable to downturns in our business, our industry or the economy in general.
Our operations may not generate sufficient
cash to enable us to service our debt. If we were to fail to make any required payment under the notes and agreements governing
our indebtedness or fail to comply with the covenants contained in the notes and agreements, we would be in default. Our debt holders
would have the ability to require that we immediately pay all outstanding indebtedness. If the debt holders were to require immediate
payment, we might not have sufficient assets to satisfy our obligations under the notes or our other indebtedness. In such event,
we could be forced to seek protection under bankruptcy laws, which could have a material adverse effect on our existing contracts
and our ability to procure new contracts as well as our ability to recruit and/or retain employees. Accordingly, a default could
have a significant adverse effect on the market value and marketability of our common stock.
5
We have limited operating history
which makes it difficult to predict future growth and operating results.
We have a relatively short operating history
which makes it impossible to reliably predict future growth and operating results. We are subject to all the risks and uncertainties
which are characteristic of a relatively new business enterprise, including the substantial problems, expenses and other difficulties
typically encountered in the course of its business, in addition to normal business risks. We face a high risk of business failure
because we have commenced extremely limited business operations and have earned little revenues and have had only material losses
since our inception. We expect to continue to incur losses well into the future. Our activities to date have been limited to organizational
efforts, including fundraising, research and development, product design, marketing and manufacturing a small number of automated
storage and parking systems and limited sales of our systems. There is no relevant history upon which to base any assumption as
to the likelihood that our business will be successful, and there can be no assurance that we will generate significant operating
revenues in the future or that we will ever be able to achieve profitable operations in the future. We face all of the risks commonly
encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional
capital and personnel, and intense competition.
We have a limited amount of cash
to grow our operations. If we cannot obtain additional sources of cash, our growth prospects and future profitability may be materially
adversely affected and we may not be able to implement our business plan or fulfill existing contracts. Such additional financing
may not be available on satisfactory terms or it may not be available when needed, or at all.
As of June 30, 2012, we had cash and cash
equivalents of $3,261,098. At the present time, we believe our working capital together with cash from ongoing projects are sufficient
to support our marketing activities, administrative requirements and existing projects. However, to implement our full business
plan, we may require additional funds during the fiscal year ending September 2013, and would anticipate seeking to raise these
funds through public or private debt or equity offerings, including offerings to our existing security holders. In addition, we
may seek to restructure our existing liabilities and debt. There can be no assurance that the capital we require to meet our operating
needs will be available to us on favorable terms, or at all. If we are unsuccessful in raising sufficient capital, we may be required
to curtail our operations. If we issue securities to raise capital, our existing stockholders may experience dilution, or the new
securities may have rights senior to those of our common stock.
Moreover, if we do not have adequate capital
to complete a contract subsequent to its commencement, particularly if we have received installment payments, we may be subject
to claims for failure to perform by the customer. Our financial condition may also deter potential customers from contracting with
us.
We have a history of losses and
cash outflow from operations which may continue if we do not increase our sales or reduce our costs.
Since emerging from the status of a business
development company in 2008, we have generated few sales, and have generated an operating loss in each financial period. Our accumulated
deficit as of September 30, 2011 was $52,812,498 and as of June 30, 2012 was $66,191,233. Losses are continuing to date and are
expected to continue into the future until such time as we are able to generate meaningful sales of our systems. In order to improve
our profitability, we will need to continue to generate new sales while controlling our costs. As we plan to continue to invest
to grow our business, we may not be able to successfully generate sufficient sales to achieve profitability. Our ability to achieve
profitability also depends on our ability to expand our customer base and scale up our production capacity beyond our existing
capacity, as well as our ability to provide products to meet the demands of our customers. If we fail to reduce the cash consumption
from operations and to generate cash from other sources on a timely basis, or if the cash requirements of our business change as
the result of changes in the cost of materials, a decline in the real estate market or other causes, we could no longer have the
cash resources required to run our business. There is no assurance that we will achieve profitable operations at any point in time
or at all.
6
The loss of one or more of our
raw materials suppliers or suppliers of components used in our equipment, or increase in prices, could cause production delays,
a reduction of revenues or an increase in costs.
The principal raw materials we use are steel
and related products. In addition, we use several components such as batteries, control boards and sensors in the manufacture of
our equipment. We have no long-term supply agreements with any of our major suppliers. However, we have generally been able to
obtain sufficient supplies of raw materials and components for our operations. Although we believe that such raw materials and
components are readily available from alternate sources, an interruption in the supply of steel and related products or a substantial
increase in the price of any of these raw materials and components could result in a delay in our ability to build and install
systems and reductions in our profit margins.
We have neither commissioned nor
performed any detailed market studies. Our assumptions regarding the potential market for our products may be incorrect.
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. Although we believe there is a substantial market for our automated parking and storage
systems, there can be no assurance that the market for these systems will be significant.
We have only recently begun to
commercialize our automated parking and storage systems, which have not been fully field tested and remain unproven.
All of the contracts we currently have are
subject to various uncertainties with respect to the underlying projects. To date, we have not completed the commercial installation
of any automated parking systems. We expect that, as our systems are installed and used, they will be tested in ways that we cannot
fully duplicate outside of the context of an actual, commercial operation of our systems, which has not yet occurred. As a result,
once our parking systems are used in commercial operations, we expect to discover various aspects of our systems that require improvement.
Based on the limited operation of our test systems to date, it is possible there may be a need for the redesign of certain aspects
of our systems. Any redesign requirement could delay existing projects and new sales, could result in increased cost or lowered
performance for our systems and could negatively impact the market's acceptance of our systems.
Because our parking systems are
different from those currently available, we must actively seek market acceptance of our systems, which we expect may occur gradually,
if at all.
Our systems are new and our current system
RoboticValet™ automated parking system is substantially different from existing automated parking systems as well as traditional
parking garages. A number of enterprises, municipalities and other organizations that could be potential customers for our systems
may be reluctant to commit themselves to our systems until one or more systems have been tested in commercial operations over a
significant period of time. As a result, we may experience difficulty in achieving market acceptance for our systems. A number
of automated parking systems exist in the United States and elsewhere. Most of these systems are materially different in concept
from our robotic system. We believe that our RoboticValet™ system offers a number of advantages over existing automated systems
and traditional parking structures. However, we expect challenges in demonstrating the advantages of our systems to potential customers
and possibly others in the absence of significant historical data as to their performance. A customer that purchases our systems
will likely design the project around it and therefore would encounter significant difficulties if the system did not perform as
claimed. We expect that widespread market acceptance of our systems may occur only gradually over time, if at all. A significant
ramp-up in sales may be delayed until our systems achieve a meaningful history of commercial operations, which would delay our
anticipated recognition of revenues.
7
We may incur significant costs
in connection with the start-up of new contracts before receiving related revenues, which could result in cash shortfalls and fluctuations
in quarterly results from period to period.
We may incur expenses before we receive
any contract payments. These expenses include design and manufacturing expenses. For example, contracts may not fund start-up costs
related to the project and may require that the purchaser obtain necessary regulatory and governmental approvals for development
of an automated parking system prior to our receiving a deposit or commencing work on the project. Accordingly, even if we are
successful in negotiating deposit payments, we may be required to invest significant sums of money before receiving further related
contract payments and the timing of installment payments may not match the timing of our cash outlays. Additionally, any resulting
cash shortfall could be exacerbated if we fail to promptly receive payment upon completion of a portion of a project or to otherwise
collect fees in a timely manner. A cash shortfall could result in significant consequences. For example, it:
·
could increase our vulnerability to general adverse economic and industry conditions;
·
would require us to dedicate a substantial portion of our cash flow from operations to service payments on our indebtedness;
reducing the availability of our cash flow to fund future capital expenditures, working capital, execution of our growth strategy,
research and development costs and other general corporate requirements;
·
could limit our availability to undertake additional projects;
·
could limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a
competitive disadvantage compared with competitors; and
·
could limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
As a result, there are no assurances that
additional funds, if needed, to help fund start-up costs related to new contracts would be available or, if available, on terms
advantageous to us and therefore we may have to dramatically curtail or cease operations.
We have continued to experience
delays and cost overruns on our first APS project and may experience delays and cost overruns on future projects.
We have experienced a number of delays
and cost overruns on the project on Collins Avenue in Miami Beach for a number of reasons including the following:
·
As a result of this being the first APS project of this size that we have executed, we had a limited ability to properly estimate
the time and resources required to fully design, engineer, manufacture, ship, install, and commission prior to executing the project.
8
·
In addition, while our system constitutes a key component of our customer's real estate development project, the project
itself consists of many other components not provided by us. Some of these components, such as the foundation upon which the system
is to be installed, must be in place before we can install our system. In addition, other components provided by the customer such
as the building shell erected around our parking system and the fire suppression system installed within our parking system are
not supplied by us but must be implemented in conjunction with the installation and commissioning of our system. Delays in the
procurement of those components, and lack of coordination between other contractors implementing those components, which were not
our contractual responsibility, had a negative impact on the project schedule and resulted in cost overruns. While we typically
contract for the right to bill our customer additional charges for change orders, delays and cost overruns caused by such circumstances,
we may choose not to charge our customer in a good faith effort to maintain a positive relationship with our customer.
·
At this time we have yet to complete this project which is behind schedule and over budget. In order to accelerate completion
of this project, we have allocated additional resources and staff, and we cannot be certain about how much additional time and
resources it will take to complete. Because we have limited resources, additional time and effort spent on this project may have
an adverse effect on our ability to support other projects and various critical aspects of our business plan.
·
In discussions with the customer, we have had disagreements as to what constitutes the completion of the system. In the event
that we cannot agree upon whether the project has been satisfactorily completed, it could adversely affect our ability to collect
additional amounts for this project and our reputation in the marketplace.
We may experience substantial delays in
the start dates, manufacturing and installation of our systems for our current and future contracts due to factors out of our control.
Although we are not experiencing delays
in obtaining approvals necessary to begin fulfilling contracts, certain of our customers are experiencing delays in their efforts
to obtain the necessary financing and/or government permitting required for their entire project to move forward, of which our
systems may only be a small component. Some examples of tasks a real estate developer may need to complete before commencing the
construction of a building include:
·
conducting environment impact studies;
·
conducting traffic impact studies;
·
securing planning approvals;
·
finishing design of building;
·
finishing engineering of building;
·
securing construction permits;
·
selecting general contractor; and
·
securing construction loan.
9
We may not receive substantial
payments under our contracts until the installation of all or a portion our systems, which in some cases could take over a year
or longer, or may not occur at all.
We expect to receive a majority of our contract
payments during the design, fabrication and assembly phases of our projects. However, a substantial portion of the contract payments
will be collected during the installation and system acceptance phases. While we have opportunities to install our systems in existing
parking structures, we anticipate that the bulk of our opportunity will be in connection with new parking structures. For our systems
to work most effectively, the parking structure itself must be designed with the use of our system in mind. Accordingly, we expect
that the majority of our sales contracts will be entered into at the planning stage for the related construction project. We expect
that the sales cycle, itself, will often be long because of the need to coordinate the design and permitting process for the project
as a whole. Large construction projects requiring parking facilities for numerous vehicles typically take several years to plan,
finance, permit and complete. Our existing contracts provide that we will be paid upon completion of various stages of completion
of the project. We anticipate that, in most cases, our systems will be installed toward the end of the project construction process,
which could occur several years after the sale is originally made. Even where our contracts provide for deposit payments before
we begin work and for payments on a percentage of completion basis for the work we do, there can be no assurance that our costs
will not outpace the payments received. In addition, if a project fails or is terminated prior to installation of our system, we
will not receive the remaining installment payments, which could result in our incurring a significant loss on the termination
of the project.
Because our systems are complex, it
is difficult to know prior to commencing project specific design and engineering work if our proposed system is adequate to meet
the customer's requirements.
Because our systems are complex, it is difficult
to know prior to commencing project specific design and engineering work if our proposed system is adequate to meet the customer's
requirements. Since we typically do not perform such work until we have been contracted by our customer, it is possible that we
may have to renegotiate the price and terms of our contracts, if in the course of designing and engineering the system we determine
that we had previously underestimated the scope of the customer's requirements. In such a situation it is possible that we
may not be able to negotiate an alternate solution and price with our customer which might in turn result in a termination of our
contract
Some of our contracts contain fixed-price
provisions that could result in losses or decreased profits if we fail to accurately estimate our costs.
To date, we have incurred a loss on all
of our contracts. Some of our contracts contain pricing provisions that require the payment of a set fee by the customer for our
services regardless of the costs we incur in performing these services. In such situations, we are exposed to the risk that we
will incur significant unforeseen costs in performing the contract. Therefore, the financial success of a fixed-price contract
is dependent upon the accuracy of our cost estimates made during contract negotiations. Prior to bidding on a fixed-price contract,
we attempt to factor in variables including equipment costs, labor, materials and related expenses over the term of the contract.
However, it is difficult to predict future costs, especially for contract terms that range from 3 to 5 years. Any shortfalls resulting
from the risks associated with fixed-price contracts will reduce our working capital and profitability. Our inability to accurately
estimate the cost of providing services under these contracts could have an adverse effect on our profitability and cash flows.
10
The economic decline has caused,
and may continue to cause, a decline in the type of real estate development projects that we intend to target.
Because our sales will depend on the development
of projects in which our systems will be incorporated, our sales are likely to be heavily dependent on the construction climate
in the markets that we address. Since 2007, new real estate projects in the United States have experienced substantial declines
and it is not clear whether, when or to what extent a recovery will occur. A continued slump in new project construction would
make it more difficult for us to achieve our growth objectives.
Our ability to perform under our
contracts and thereby recognize revenues is dependent on the ability of the project owner to commence and complete construction
of the project.
Major residential and commercial construction
projects are subject to various uncertainties at several stages. Design, permitting or financing issues can result in substantial
delays and, ultimately, can render a project untenable. Furthermore, even when the underlying project is fully funded and permitted,
economic and other real estate market conditions, and possible interruptions in the project moving forward, continue to create
uncertainty as to whether and when the project will be completed. Changes in demographics and other macroeconomic changes can cause
major construction projects to be delayed or abandoned because they are no longer viable or because they cannot be financed. For
example, the recent recession has resulted in a substantial decrease in construction on a global basis. We intend that our contracts
with our customers will provide for a percentage of the contract price to be paid to us if a project is substantially delayed or
abandoned. However, we may be unable to negotiate such arrangements and any such compensation is likely to be substantially less
than the revenues and profit we would have earned if the project had been completed. Our long-term planning will be based on various
assumptions about project completion rates that may not prove to be accurate. A significant delay in construction schedules or
a significant number of project abandonments would have a material adverse impact on our business.
We have limited experience estimating
our manufacturing and other costs and may underestimate these costs rendering our contracts less profitable or creating losses.
Through the date of these financial statements,
we have manufactured and assembled one automated parking and one automated storage system intended for commercial use, and have
a third system currently being assembled. Accordingly, we have limited experience in acquiring and manufacturing the parts and
components for the systems, assembling the systems, and in estimating the labor and overhead costs incurred with manufacturing
the parts and components for the systems, assembling the systems, and in estimating the labor and overhead costs incurred with
the manufacturing, assembling and installing the automated parking and storage systems. This limited experience may result in us
underestimating these costs which could lead to our expenses exceeding the revenues we receive from the contracts we have entered
into and that we may enter into in the future. Moreover, we anticipate that due to our limited experience in executing projects
of this size, executing multiple projects at the same time may affect our ability to deliver systems on a consistent and timely
basis. Losses on our contracts will deplete our cash resources and adversely affect our revenues. At June 30, 2012, we estimated
that we would incur a loss on a rail based project. The total loss was estimated to be approximately $3,275,000 through completion
of the project, which is expected to be on or about November 2012.
11
We expect to face intense competition
in selling our systems and we may not be able to compete with our more established competitors.
While we believe that our systems offer
a number of advantages over existing garage structures, and other automated parking systems, we expect to face intense competition
not only from other systems, but from rack and rail systems and traditional parking garages. Many of the companies with which we
may compete have established products, existing relationships and financial capacity that may offer them a competitive advantage.
If we are correct in our assumption that the advantages of our systems are significant to customers, we can anticipate that other
companies, some with stronger engineering and financial capabilities than we have, will seek to design comparable systems that
offer similar or greater advantages. We expect that we will have to continually innovate to reduce cost and increase effectiveness
in order to remain competitive and there is no assurance that our systems will become competitive or remain so over time.
Our lack of sufficient patent
protection may undermine our competitive position and subject us to intellectual property disputes with third parties, both of
which may have a material adverse effect on our business, results of operations and financial condition.
We have filed patent applications with respect
to certain aspects of our automated self-storage and automated parking systems but to date we have not been granted any patent
protection for our automated parking or self-storage systems and there can be no assurance that, if one or more of our pending
applications were allowed, any significant patent protection would be granted.
Accordingly, we may have limited protection
to prevent others from entering into competition with us.
In addition, others may obtain knowledge
of our know-how and technologies through independent development. Our failure to protect our production process, related know-how
and technologies and/or our intellectual property and proprietary rights may undermine our competitive position. Third parties
may infringe or misappropriate our proprietary technologies or other intellectual property and proprietary rights. Policing unauthorized
use of proprietary technology can be difficult and expensive. Litigation, which can be costly and divert management attention and
other resources away from our business, may be necessary to enforce our intellectual property rights, protect our trade secrets
or determine the validity and scope of our proprietary rights. We cannot assure you that the outcome of such potential litigation
will be in our favor. An adverse determination in any such litigation will impair our intellectual property and proprietary rights
and may harm our business, prospects and reputation.
We may be exposed to infringement
or misappropriation claims by third parties, which, if determined adversely to us, could cause us to pay significant damage awards.
Our success also depends largely on our
ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. The
validity and scope of claims relating to patents involve complex scientific, legal and factual questions and analysis and, therefore,
may be highly uncertain. We may be subject to litigation involving claims of patent infringement or violation of intellectual property
rights of third parties. The defense and prosecution of intellectual property suits and related legal and administrative proceedings
can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel.
An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability
to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our anticipated products
or subject us to injunctions prohibiting the manufacture and sale of our anticipated products or the use of our technologies. Protracted
litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our anticipated
products until resolution of such litigation.
12
Failures of our systems could
expose us to liabilities that may not be fully covered by insurance.
Although we have designed a number of safeguards
into our systems, they may fail, causing delays, injury or damage to persons, vehicles or other property that may not be covered
by insurance. Our insurance does not cover any contractual liability that we may have as a result of a delay in delivery of systems
to our customers. Any such events, whether covered by insurance or not, could have a material adverse effect on our business.
Our success is dependent upon
our executive officers and other key personnel.
We rely for the conduct of our business
on a small group of people whose expertise and knowledge of our business are critical to the prospects for its success. Our Chief
Executive Officer, President, and the Chief Executive Officer of our wholly owned subsidiary have accepted substantial equity interests
and less cash for their services and it is unlikely that we could attract employees of comparable ability for the cash compensation
that we are currently paying to these individuals. The loss of any of our key management team would cause significant disruption
in our operations and would require us to seek suitable replacements. There is no assurance that we could attract qualified employees
quickly or without incurring significant increased cost.
Because some of our officers have
only agreed to provide their services on a part-time basis, they may not be able or willing to devote a sufficient amount of time
to our business operations, which may cause our business to fail.
Although our Chief Executive Officer has
agreed to devote the vast majority of his productive time, ability and attention to our business, he also is permitted to provide
consulting services to third parties on a limited basis, and to serve on other boards of directors. In addition, Stan Checketts,
Chief Executive Officer of our wholly owned operating subsidiary, Boomerang Sub, Inc., and a member of the Company's Board
of Directors, has commenced developing, manufacturing, and selling amusement rides through Stan Checketts Properties. As a result,
he devotes less than the majority of his time to us. Accordingly, these officers may not be able to devote sufficient time to the
management of our business, as and when needed. It is possible that the demands of these officers' other business commitments
will keep these officers from devoting sufficient time to the management of our business. Competing demands on these officers'
time may lead to a divergence between their interests and the interests of other shareholders.
Our foreign operations, could
subject us to increased regulations and risks. Failure to comply with these laws may affect our ability to conduct business in
certain countries and may affect our financial performance.
We are currently actively seeking customers
in the United Arab Emirates and the surrounding Gulf region and may seek customers in India and other countries. Our foreign operations
might or would subject us to a number of risks, including:
·
currency fluctuations, which could affect our revenues for transactions denominated in non-U.S. currency or make our services
relatively more expensive if denominated in United States currency;
·
difficulties in staffing and managing multi-national operations;
·
political and economic instability;
13
·
limitations on our ability to enforce legal rights and remedies;
·
restrictions on the repatriation of funds;
·
changes in regulatory structures or trade policies; and
·
tariff and tax regulations.
We are subject to a variety of laws regarding
our international operations, including the Foreign Corrupt Practices Act and regulations issued by U.S. Customs and Border Protection,
the Bureau of Industry and Security, and the regulations of various foreign governmental agencies. We cannot predict the nature,
scope or effect of future regulatory requirements to which our international sales and manufacturing operations might be subject
or the manner in which existing laws might be administered or interpreted. Future regulations could limit the countries in which
some of our products may be manufactured or sold, or could restrict our access to, and increase the cost of obtaining, products
from foreign sources. In addition, actual or alleged violations of these laws could result in enforcement actions and financial
penalties that could result in substantial costs.
Our systems and the projects in
which they are installed are subject to complex and diverse regulation that may increase the cost of our systems or limit their
efficiency.
Our systems and the real estate development
projects in which they are installed are subject to a variety of regulations, including zoning and building codes, permitting,
and fire and other safety regulations. Most of these regulations are local and vary considerably from location to location. We
and our customers will be required to design systems and garages that conform to all applicable regulations, which may make it
more difficult to standardize our offerings or to maximize the efficiency of our systems. The enforcement of local regulations
often involves the exercise of considerable judgment and there is likely to be a certain level of uncertainty as to what the regulations
will be held to require in each project. Local regulations may cause delays or cost increases that could have an adverse impact
on our business.
Environmental regulation and liability
may increase our costs and adversely affect us.
Our manufacturing operations are subject
to federal and state environmental laws and regulations concerning, among other things, water discharges, air emissions, hazardous
material and waste management. Environmental laws and regulations continue to evolve and we may become subject to increasingly
stringent environmental standards in the future, particularly under air quality and water quality laws and standards related to
climate change issues, such as reporting of greenhouse gas emissions. We are required to comply with environmental laws and the
terms and conditions of environmental permits. Failure to comply with these regulations, laws or permits could result in fines
and penalties. We also may be required to make significant expenditures relating to environmental matters on an ongoing basis.
14
Based upon our marketing experience
to date, we expect to undergo rapid growth of our operations as our sales, manufacturing and installation activity increase; we
may be unable to manage this growth, to retain qualified employees and to implement infrastructure changes necessary to support
this growth which would negatively adversely affect us.
We are currently managed and run by a small
staff of employees who are engaged primarily in system design, manufacture and sales activity and general and administrative functions.
We expect that, if sales increase as we anticipate, and particularly as sales cycles advance, we will be subjected to rapid growth
and a substantial increase in the activities that we are called upon to perform and the duties we must fulfill. We may fail properly
to anticipate the need for additional employees or be unable to attract and retain qualified employees as required to sustain our
expected growth. We will also be required to put in place in a timely manner effective accounting systems, reporting structures
and other infrastructure required to sustain our growing and developing operations. The failure to anticipate and effectively deal
with these requirements could cause us to miss opportunities that would otherwise be available to us and could cause our performance
to suffer across a broad range of activities. Any such occurrences would have a material adverse effect on our business and prospects.
Our management has limited experience
managing a public company and our current resources may not be sufficient to fulfill our public company obligations.
As a public company, we are subject to various
requirements of the Securities and Exchange Commission, including record-keeping, financial reporting, and corporate governance
rules. Our management team has limited experience in managing a public company and, historically, has not had the resources typically
found in a public company. Our internal infrastructure may not be adequate to support our reporting and other compliance obligations
and we may be unable to hire, train or retain necessary staff and may be reliant on hiring outside consultants or professionals
to overcome our lack of experience or trained and experienced employees. Our business could be adversely affected if our internal
infrastructure is inadequate, we are unable to engage outside consultants, or are otherwise unable to fulfill our public company
obligations.
Our management and a limited number
of stockholders, many of whom are related parties, collectively hold a controlling interest in us, they have significant influence
over our management and their interests may not be aligned with our interests or the interests of our other stockholders.
Our company's management and a limited
number of stockholders, many of whom are related parties, retain majority control over us and our business plans and investors
may be unable to meaningfully influence the course of action of our company. The existing management and a limited number of stockholders,
many of whom are related parties, are able to control substantially all matters requiring stockholder approval, including nomination
and election of directors and approval or rejection of significant corporate transactions. There is also a risk that our existing
management and a limited number of stockholders may have interests which are different from investors and that they will pursue
an agenda which is beneficial to themselves at the expense of other stockholders.
There are limitations on the liabilities
of our directors and executive officers. Under certain circumstances, we are obligated to indemnify our directors and executive
officers against liability and expenses incurred by them in their service to us.
Pursuant to our amended and restated certificate
of incorporation and under Delaware law, our directors are not liable to us or our stockholders for monetary damages for breach
of fiduciary duty, except for liability for breach of a director's duty of loyalty, acts or omissions by a director not in
good faith or which involve intentional misconduct or a knowing violation of law, dividend payments or stock repurchases that are
unlawful under Delaware law or any transaction in which a director has derived an improper personal benefit. In addition, we have
entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things,
require us to indemnify each director and executive officer for certain expenses, including attorneys' fees, judgments, fines
and settlement amounts, incurred by any such person in any action or proceeding, including any action by us or in our right, arising
out of the person's services as one of our directors or executive officers. The costs associated with providing indemnification
under these agreements could be harmful to our business.
15
Risks Related to Our Securities
The notes are unsecured, and,
therefore, are effectively subordinated to any secured debt and to all liabilities of our subsidiaries.
The notes are unsecured and unsubordinated,
ranking senior in right of payment to all unsecured and subordinated indebtedness and equally in right of payment to all other
unsecured and unsubordinated indebtedness. Effectively the notes are subordinated in right of payment to all of our existing senior
and secured indebtedness, including any indebtedness under any future credit facilities we or any of our subsidiaries may enter
into. In the event of our bankruptcy, liquidation, or reorganization or upon acceleration of the notes due to an event of default
under the notes and in certain other events, our assets will be available to pay obligations on the notes only after all of our
senior and secured indebtedness has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on
any or all of the outstanding notes.
The notes are effectively subordinated
to the indebtedness of our subsidiaries.
The notes are solely obligations of Boomerang
Systems, Inc. and, accordingly, are effectively subordinated to all debt and other liabilities of our subsidiaries. We are a holding
company with no significant operations of our own. Because our operations are conducted through our subsidiaries, we depend on
dividends, loans, advances and other payments from our subsidiaries in order to allow us to satisfy our financial obligations,
including payments of principal and interest on the notes. Our subsidiaries are separate and distinct legal entities with no legal
obligation to pay any amounts to us. The ability of our subsidiaries to pay dividends and make other payments to us depends on
their earning capital requirements and general financial conditions and is restricted by, among other things, applicable corporate
and other laws and regulations as well as, in the future, agreements to which our subsidiaries may be a party.
We may not have the funds necessary to repay
the notes at maturity. At maturity, the entire outstanding principal amount of the notes will become due and payable by us. It
is possible that we may not have sufficient funds to repay or repurchase the notes when required. No sinking fund is provided for
the notes.
We may not have sufficient cash
flow to make payments on the notes and our other indebtedness.
Our ability to pay principal and interest
on the notes and our other debt and to fund our planned capital expenditures and other growth initiatives depends on our future
operating performance. Our future operating performance is subject to a number of risks and uncertainties that are often beyond
our control, including general economic conditions and financial, competitive and regulatory factors. For a discussion of some
of these risks and uncertainties, please see "– Risks Related to Our Business."
The conversion price of the notes
or exercise price of the warrants may not be adjusted for all dilutive events that may occur.
The conversion rate of the notes and exercise
price of the warrants are subject to adjustments for certain events, including, but not limited to, the issuance of stock dividends
on our common stock, the issuance of certain rights or warrants, subdivisions or combinations of our common stock, certain distributions
of capital stock, indebtedness, or assets, cash dividends, and issuer tender or exchange offers. The conversion price or exercise
price may not be adjusted for other events that may adversely affect the value of the notes, warrants or the common stock into
which such notes may be convertible or warrants may be exercisable.
16
Conversion of the notes or exercise
of the warrants will dilute the ownership interest of existing stockholders, including holders who had previously converted their
notes or exercised their warrants.
The conversion of some or all of the notes
or exercise of some or all of the warrants will dilute the ownership interests of existing stockholders. Any sales in the public
market of the common stock issuable upon conversion of the notes or exercise of the warrants could adversely affect prevailing
market prices of our common stock. In addition, the existence of the notes or warrants may encourage short selling by market participants
because the conversion of the notes or exercise of the warrants could depress the price of our common stock.
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. In the light of the Company's operating
history, continuing losses and financial condition, quotations published in the "pink sheets" are not necessarily indicative
of the value of the Company. Such quotations are inter-dealer prices, without retail mark-up, mark-down or commissions and may
not necessarily represent actual transactions. 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 OTC Bulletin Board or in the OTCQB tier of the
OTC Markets. It is possible that no active public market with significant liquidity will ever develop. This could negatively impact
your ability to sell the notes, warrants or common stock.
Fluctuations in the price of our
common stock may impact your ability to resell the notes, warrants or the common stock issuable upon conversion of the notes or
exercise of the warrants when you want or at prices you find attractive.
Because the notes are convertible into and
the warrants are exercisable for our common stock, volatility or depressed prices for our common stock could have an effect on
the trading price of the notes or warrants. Holders who have received common stock upon conversion of the notes or exercise of
the warrants will also be subject to the risk of volatility and depressed prices of our common stock.
Our common stock price can fluctuate as
a result of a variety of factors, many of which are beyond our control. These factors include, among others:
·
our performance and prospects;
·
the depth and liquidity of the market for our common stock;
·
investor perception of us and the industry in which we operate;
·
changes in earnings estimates or buy/sell recommendations by analysts;
·
general financial and other market conditions; and
·
general economic conditions.
In addition, the stock market in general
has experienced extreme volatility that has often been unrelated to the operating performance of a particular company. These broad
market fluctuations may adversely affect the market price of our common stock.
17
Application of guidance related
to the Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock has
negatively impacted our statement of operations for the three and nine months ended June 30, 2012 and could continue to negatively
impact our statement of operations.
For the nine months ended June 30, 2012,
we reported an unrealized loss on derivatives of $2,579,818 in our consolidated statements of operations as a result of the change
in fair value of derivative warrant liability relating to the outstanding warrants issued in our November and December 2011 and
June 2012 offerings. Our net income (loss) will continue to fluctuate as a result of the impact of such warrants and will be adversely
affected in each reporting period in which the fair value of the warrants that remain outstanding increase.
There is no public market for
the notes or warrants, which could limit their value or your ability to sell them.
There is currently no public market for
the notes or warrants. We do not intend to list the notes or warrants on any national or other securities exchange. Accordingly,
no public market for the notes or warrants may develop, and any market that develops may not last. Even if an active trading market
were to develop, the notes and warrants could trade at prices that may be lower than the price at which a holder purchased the
notes or warrants, or holders could experience difficulty or an inability to resell the notes or warrants. Any future trading prices
of the notes and warrants will depend on many factors, including prevailing interest rates, the market for similar securities,
general economic conditions, and our financial condition, performance, and prospects. You may be required to bear the financial
risk of an investment in the notes or warrants for an indefinite period of time.
Holders of notes and warrants
are not entitled to any rights with respect to our common stock, but you are subject to all changes made with respect to our common
stock.
Holders of notes and warrants will not be
entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any
dividends or other distributions on our common stock), but will be subject to all changes affecting the common stock. Holders of
notes and warrants will only be entitled to rights in respect of our common stock if and when we deliver shares of common stock
to you upon conversion of your notes or exercise of your warrants and, to a limited extent, under the conversion price or exercise
price adjustments applicable to the notes or warrants, as applicable. For example, in the event that an amendment is proposed to
our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders
of record entitled to vote on the amendment occurs prior to delivery of common stock to you, you will not be entitled to vote on
the amendment, although you will nevertheless be subject to any changes in the powers or rights of our common stock.
We are subject to the penny stock
rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to its customers prior
to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our Common
Stock, which in all likelihood would make it difficult for our stockholders to sell their securities.
Rule 3a51-1 of the Securities Exchange Act
of 1934 establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has
a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number
of exceptions which are not available to us. This classification would severely and adversely affect any market liquidity for our
Common Stock.
18
For any transaction involving a penny stock,
unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny
stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the
broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable
determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which,
in highlight form, sets forth:
·
The basis on which the broker or dealer made the suitability determination; and
·
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and commission payable to both the broker-dealer
and the registered representative, current quotations for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers
may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling securityholders or other holders to sell their shares
in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional
sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly
traded. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common
stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our stockholders
will, in all likelihood, find it difficult to sell their common stock.
Future sales of our common stock
in the public market or the issuance of our common stock or securities senior to our common stock could adversely affect the trading
price of our common stock.
Our Certificate of Incorporation currently
authorizes our Board of Directors to issue up to 400,000,000 shares of common stock and 1,000,000 shares of undesignated preferred
stock. In addition, on June 20, 2011, we effected a one-for-twenty reverse split, referred to as the Reverse Split, of our issued
and outstanding common stock which has the effect of increasing the number of authorized shares available for future issuance.
Any additional issuances of any of our authorized but unissued shares will not require the approval of stockholders and may have
the effect of further diluting the equity interest of stockholders.
We may issue common stock or equity securities
senior to our common stock in the future for a number of reasons, including to attract and retain key personnel, to finance our
operations and growth strategy, to adjust our ratio of debt to equity, to satisfy outstanding obligations or for other reasons.
If we issue securities, our existing stockholders may experience dilution or the new securities may have rights senior to those
of our common stock. In addition, the terms of these securities could impose restrictions on our operations. Future sales of our
common stock, the perception that such sales could occur or the availability for future sale of shares of our common stock or securities
convertible into or exercisable for our common stock could adversely affect the market prices of our common stock prevailing from
time to time.
19
As of September 13, 2012, we had:
·
8,725,366 shares of common stock that were subject to outstanding warrants;
·
641,385 shares of common stock that were subject to options; and
·
$17,824,520 of outstanding notes that were convertible into a maximum of 3,975,206 shares of common stock, subject to adjustment.
We have never paid dividends on
our common stock and do not expect to pay dividends in the foreseeable future.
We intend to invest all available funds
to finance our growth. Therefore our stockholders cannot expect to receive any dividends on our common stock in the foreseeable
future. Even if we were to determine that a dividend could be declared, we could be precluded from paying dividends by restrictive
provisions of loans, leases or other financing documents or by legal prohibitions under applicable corporate law.
STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements included in this prospectus
and any prospectus supplement are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, which we refer to as the Securities Act.  All statements other than statements of historical facts contained
in this prospectus and any prospectus supplement, including statements regarding our plans, objectives, goals, strategies, future
events, capital expenditures, future results, our competitive strengths, our business strategy and the trends in our industry are
forward-looking statements.  The words "believe," "may," "could," "estimate,"
"continue," "anticipate," "intend," "should," "plan," "expect,"
"appear," "future," "likely," "probably," "suggest," "goal,"
"potential" and similar expressions, as they relate to us, are intended to identify forward-looking statements.  All
statements, other than statements of historical fact, included in this prospectus and any prospectus supplement regarding our financial
position, business strategy and plans or objectives for future operations are forward-looking statements.
Forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking
statements.  For example, and in addition to the "Risk Factors" discussed elsewhere in this prospectus,
risks and uncertainties can arise with changes in:
·
Failure of our systems to be accepted by parking garage builders;
·
Failure of our systems to perform as we expect in commercial operation;
·
A significant decline in the rate of construction or remodeling of parking garages or significant delays in the construction
or remodeling of parking garages;
·
Our inability to effectively market our systems;
20
·
The development by a competitor of a comparable or superior system;
·
Our inability to manage our anticipated growth by recruiting and training experienced personnel and implementing infrastructure
changes;
·
Our indebtedness and ability to meet obligations;
·
Our inability to become profitable;
·
Our inability to estimate contract expenses and customer requirements and deliver systems on a timely basis;
·
Our inability to protect our intellectual property;
·
Our inability to finance our expected growth; and
·
Enactment of laws or regulations that make our systems less effective or more costly.
Readers are cautioned not to place undue reliance on any forward-looking
statement, which reflects management's analysis only as of the date of the statement.  Except as required by applicable
law or regulation, we do not undertake, and specifically disclaim any obligation to update or revise any forward-looking statements
to reflect any changed assumptions, any unanticipated events or any changes in the future.
In addition, you should refer to the "Risk
Factors" section of this prospectus beginning on page 5 for a discussion of factors that may cause our actual results
to differ materially from those which may be inferred from our forward-looking statements.  As a result of these factors,
the forward-looking statements in this prospectus and any prospectus supplement will prove to be accurate.  Furthermore,
if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.  In light of the significant
uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us
or any other person that we will achieve our objectives and plans in any specified time frame, if at all.  Accordingly,
you should not place undue reliance on these forward-looking statements.  All subsequent written and oral forward-looking
statements attributable to us or the persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary
statements.
21
USE OF PROCEEDS
We will not receive any proceeds from the
sale of the securities offered by the selling securityholders, except that we may receive the exercise price from the exercise
of the warrants to purchase common stock for the underlying common stock to the extent the cashless exercise provision contained
in the warrants is not utilized.
If all warrants are exercised for cash at
an exercise price of $5.00 per share, we would receive gross proceeds of approximately $6.5 million. We intend to use any proceeds
we may receive from the cash exercise of the warrants for working capital and other general corporate purposes. There is no assurance
that any or all of the warrants will ever be exercised for cash or at all.
DIVIDEND POLICY
We have never declared or paid any dividends
on our capital stock and do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently
expect to retain our future earnings, if any, for use in the operation and expansion or our business. Any future decision to pay
cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results
of operations, capital requirements and other factors our board of directors may deem relevant. The notes prohibit us and our subsidiaries
while the notes are outstanding from declaring or paying any dividends to any holder(s) of our common stock or such subsidiaries
(other than dividends and distributions from a subsidiary to us).
22
MARKET FOR COMMON
EQUITY
Our common stock is quoted on the OTCQB
tier of the OTC Markets, under the symbol "BMER". As of September 13, 2012, we had 7,399,086 shares of common stock
issued and outstanding. As of September 13, 2012, there were approximately 610 record holders. The market for our common stock
is limited, sporadic and highly volatile. Since our 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 of never being able to sell
their shares. The last reported closing bid price per share of our common stock on September 12, 2012, was $3.80.
The following table sets forth the range
of high and low bid quotations for our common stock for each fiscal quarter for the fiscal years ended September 30, 2011 and 2010
and for the first three fiscal quarters and the fourth fiscal quarter through a recent date of the fiscal year ending September
30, 2012. These quotations represent prices between dealers and do not include retail mark-ups, mark-downs or commissions. They
do not necessarily represent actual transactions.
Bid Range
High
Low
Fiscal Year 2012:
Fourth Quarter (through September 12, 2012)
$
4.60
$
3.80
Third Quarter
$
4.75
$
4.40
Second Quarter
$
4.50
$
3.51
First Quarter
$
10.01
$
4.10
Fiscal Year 2011:
Fourth Quarter
$
12.00
$
6.00
Third Quarter
$
8.00
$
5.00
Second Quarter
$
12.40
$
6.60
First Quarter
$
10.60
$
6.00
Fiscal Year 2010:
Fourth Quarter
$
7.00
$
5.40
Third Quarter
$
10.00
$
5.20
Second Quarter
$
15.00
$
6.00
First Quarter
$
16.20
$
5.60
23
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion
and analysis of our consolidated financial condition, changes in financial condition and results of operations, liquidity and capital
resources presented in the consolidated financial statements included in this prospectus, beginning at page F-1. This discussion
should be read in conjunction with the included consolidated financial statements and the notes thereto.
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.
Revenue Recognition
Revenues from the sales of RoboticValet™
systems will be recognized using the percentage of completion method, whereby revenue and the related gross profit is determined
by comparing the actual costs incurred to date for the project to the total estimated project costs at completion.
Revenue from a project that is rail based
and generally completed over a period exceeding one year is recognized using the percentage of completion method, whereby revenue
and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total estimated
project costs at completion. Project costs generally include all material and shipping costs, our direct labor, subcontractor costs
and an allocation of indirect costs related to the direct labor. Changes in the project scope, site conditions, staff performance
and delays or problems with the equipment used on the project can result in increased costs that may not be billable or accepted
by the customer and a loss or lower profit from what was originally anticipated at the time of the proposal.
Estimates for the costs to complete the
project are periodically updated by management during the performance of the project. Provisions for changes in estimated costs
and losses, if any, on uncompleted projects are made in the period in which such losses are determined.
We may have service contracts in the future
after the contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed
according to the terms of the contract.
Liquidity and Capital Resources
Cash
and cash equivalents for the nine months ended June 30, 2012 increased by $3,195,508 to $3,261,098 as of June 30, 2012. At the
present time, our working capital together with cash from ongoing projects are sufficient to support our marketing activities,
administrative requirements and existing projects. However, to implement our full business plan, we may require additional funds
during the fiscal year ending September, 2013, and would anticipate seeking to raise these funds through public or private debt
or equity offerings, including offerings to our existing security holders. In addition, we may seek to restructure our existing
liabilities and debt. There can be no assurance that the capital we require to meet our operating needs will be available to us
on favorable terms, or at all. If we are unsuccessful in raising sufficient capital, we may be required to curtail our operations.
24
For
the
nine months ended June 30, 2012, we had a net loss of $13,378,735. Included in this net loss were several non-cash expenses that
did not decrease liquidity. These non-cash expenses include depreciation of $183,907, amortization of discount on convertible debt
of $1,414,594, issuance of common stock for interest of $469,160, issuance of common stock for services of $50,001, a loss on equity
investment of $105,426, expenses from the issuance of stock options of $472,399 and the issuance of warrants of $680,554, and a
non-cash loss on the fair value of derivative of $2,579,818. Cash decreased as we experienced a nine month increase in inventories
of $82,030, in security deposit of $20,825, in prepaid expenses and other assets of $21,892, in estimated loss on uncompleted contract
of $443,631, and in restricted cash of $593,228, which represents cash received on a rack and rail project and placed in escrow
until certain milestones are reached. Additionally, decreases in accounts payable and accrued liabilities of $100,356 and in deposits
payable of $55,000 contributed to decreased liquidity. These items were offset by a decrease in notes receivable of $16,748, in
accounts receivable of $185,976, and in costs in excess of billings of $204,302, and in increases in due to related party of $132,457
and in billings in excess of costs of $514,408.
After reflecting the net changes in assets and liabilities, net cash used
in operations was $6,798,685 for the nine months ended June 30, 2012.
For the fiscal year ended September 30,
2011, we had a net loss of $19,102,004. Included in the net loss were non-cash expenses for depreciation of $52,006, a loss on
disposal of equipment of $1,893 and a loss on equity investment of $153,019. We incurred additional non-cash expenses from the
issuance of stock options of $1,973,634 and the issuance of warrants of $8,127,272, which included expenses in the amount of $3,899,866
related to financing. Offsetting the use of cash from operations were year-over-year increases in accounts receivable of $175,731,
in notes receivable (non-current) of $913, in costs in excess of billings of $521,213 and year-over-year decreases in deposits
payable of $65,000 and in billings in excess of costs and estimated earned profits on uncompleted contracts of $48,186. These items
were partially offset by increases in notes receivable of $8,710, in inventories of $63,572, in prepaid expenses and other assets
of $2,889, in accounts payable and accrued liabilities of $223,273, in due to related party of $283,466 and in estimated loss on
uncompleted contract of $188,484. After reflecting the net changes in assets and liabilities, net cash used in operations was $8,834,829
for the year ended September 30, 2011.
Financing activities provided $10,278,503
for the nine months ended June 30, 2012. Net cash provided by financing activities consisted of $2,176,000 of proceeds from notes
payable and $9,825,000 of proceeds from private placements of convertible notes and warrants, offset by $1,722,497 of note repayments.
Financing activities provided $6,496,641
for the year ended September 30, 2011, a decrease of $3,844,392 from the year ended September 30, 2010. Net cash provided by financing
activities consisted of $5,725,000 of proceeds from loans payable and $1,199,999 of proceeds from private placements of common
stock, offset by $428,358 of loan repayments.
During the nine months ended June 30, 2012,
net cash used in investing activities consisted of an increase in equity investment of $186,600 and an increase in property, plant
and equipment of $97,710. Accordingly, net cash used in investing activities was $284,310.
During the fiscal year ended September 30,
2011, net cash used in investing activities consisted of an increase in equity investment of $247,395 and an increase in property,
plant and equipment of $1,633,189, which included $1,523,097 of construction in progress for the robotic system to be built in
the town of Hamburg, located in Hardyston Township, New Jersey. Accordingly, net cash used in investing activities was $1,880,584.
There were no off-balance sheet arrangements
during the fiscal year ended September 30, 2011 or the nine months ended June 30, 2012 that have or are reasonably likely to have
a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to our interests.
25
In November and December 2011, referred
to as the 2011 offering, we issued to subscribers 6% convertible promissory notes due in 2016 in the aggregate principal amount
of approximately $11.6 million, referred to as the 2011 notes, and five-year warrants to purchase common stock in a private placement,
referred to as the 2011 warrants. In connection with the 2011 offering, we received cash proceeds of approximately $5.0 million
and refinanced approximately $6.6 million of then existing short-term indebtedness. For each $100,000 invested, a subscriber was
issued a $100,000 principal amount 2011 note and 2011 warrants to purchase 23,530 shares of our common stock.
In connection with the offering, the following
related parties converted indebtedness in the amounts and for the 2011 notes and warrants listed below.
Name
Indebtedness Converted
Notes issued in
Offering
Warrants issued in
Offering
HSK Funding Inc.
(1)
$
254,000
$
254,000
59,765
Lake Isle Corporation
(2)
$
1,761,917
(10)
$
1,761,917
414,570
Christopher Mulvihill
(3)
$
1,451,000
(11)
$
1,451,000
341,412
James Mulvihill TTEE Sunset Group Inc. PSP
(4)
$
253,917
$
253,917
59,745
MRP Holdings LLC and Mark R Patterson Revocable Trust
(5)
$
608,014
$
608,014
143,063
Sail Energy LLC
(6)
$
300,142
$
300,142
70,622
Stan Checketts Properties, L.C.
(7)
$
133,571
$
133,571
31,429
SB&G Properties LLC
(8)
$
220,763
$
220,763
51,945
Venturetek L.P.
(9)
$
292,461
$
292,461
68,815
(1)
HSK Funding Inc. is a principal stockholder and a member of SB&G Properties LLC.
(2)
Gail Mulvihill, the individual who exercises sole voting and investment control over Lake Isle Corporation, is the mother of
Christopher Mulvihill, the Company's President and is a principal stockholder. Lake Isle Corporation is a member of SB&G
Properties LLC.
(3)
Christopher Mulvihill is the Company's President and director.
(4)
James Mulvihill is the brother of Christopher Mulvihill and son of Gail Mulvihill.
(5)
MRP Holdings LLC, and Mark R Patterson Revocable Trust are owned by Mark Patterson, the Company's Chief Executive Officer
and director.
(6)
Sail Energy LLC is owned by Gail Mulvihill.
(7)
Stan Checketts Properties, L.C. is owned by Stan Checketts, the Chief Executive Officer of the Company's wholly owned
subsidiary and director of the Company, and is a principal stockholder. Stan Checketts Properties is a member of SB&G Properties
LLC.
(8)
SB&G Properties LLC is owned by HSK Funding Inc., Stan Checketts Properties, Lake Isle Corporation and Venturetek L.P.
(9)
Venturetek L.P. is a principal stockholder and a member of SB&G Properties LLC.
(10)
Included in this balance is $1,000,000 of indebtedness resulting from a bank line of credit that Lake Isle Corp. caused to
be paid in full. Accordingly, the Company became indebted to Lake Isle Corp for $1,000,000.
(11)
On October 28, 2011, Atlantic and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt
owed to it by the Company to Christopher Mulvihill.
26
The 2011 notes are convertible into common
stock at $4.25 per share, referred to as the Conversion Price, subject to weighted average adjustment for issuances of common stock
or common stock equivalents below the Conversion Price, subject to certain exceptions. The 2011 notes are due on the five year
anniversary of the respective date of issuance.
Interest accrues on the 2011 notes at 6%
per annum. Interest is payable quarterly, commencing on December 31, 2011, at our option, interest may be payable in: (i) cash
or (ii) shares of the common stock. If we elect to pay interest in shares of common stock on an interest payment date, the number
of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable on such
interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the last sale price of the common stock
during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date, referred to as the average price, if the average daily trading volume, or ADTV, of the common stock for the ten (10) trading
days prior to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal to or greater than
$100,000, it will be the average price, and not the conversion price.
The outstanding principal amount of the
2011 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the notes plus accrued and unpaid interest thereon, by the conversion price in
effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2011 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such
30 trading day period equals or exceeds $500,000.
If an event of default as defined in the
2011 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2011 notes then
outstanding to be, due and payable.
For so long as the 2011 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2011 notes, we
may not:
·
create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;
·
permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2011 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and
27
·
permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of common stock or such
subsidiaries (other than dividends and distributions from a subsidiary to us) or (ii) purchase or otherwise acquire for value,
directly or indirectly, any shares or other equity security of us, other than the 2011 notes or warrants.
The 2011 warrants are exercisable at $4.25
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Cashless
exercise is permitted if the average trading volume of our common stock during at least five (5) of the ten (10) consecutive trading
days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of
the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise. In certain
instances, a holder shall not be permitted to exercise the warrant if such exercise would result in such holder's total ownership
of our common stock exceeding 4.9%. The 2011 warrants expire five years from the respective date of issuance.
In connection with the 2011 offering, we
paid a placement agent an aggregate cash fee of approximately $244,000 for its services as placement agent. We issued warrants
to the placement agent to purchase an aggregate of 109,177 shares of common stock, which warrants expire five years from the respective
date of issuance and contain substantially the same terms as those issued to subscribers.
In June and July of 2012, we issued $6.2
million aggregate principal amount of 6% convertible promissory notes due in 2017 and warrants to purchase 1,240,000 shares of
common stock.
In connection with the 2012 offering, the
following related parties of us participated in the 2012 offering.
Name
Notes issued in
Offering
Warrants issued in
Offering
MRP Holdings LLC(1)
$
150,000
30,000
Sail Energy, LLC(2)
$
510,000
102,000
Heather Mulvihill(3)
$
100,000
20,000
IA 545 Madison Assoc.(4)
$
250,000
50,000
Burton I. Koffman (4)
$
50,000
10,000
David Kent and Christine W. Koch(5)
$
75,000
15,000
________
(1)
Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company's Chief Executive Officer and a director.
(2)
Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company's
President and director.
(3)
Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.
(4)
Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.
(5)
David Kent Koch is the Company's Chief Operating Officer.
28
The 2012 notes are 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. Interest
accrues on the 2012 notes at 6% per annum. Interest is payable quarterly, commencing on June 30, 2012. At our option, interest
may be payable in: (i) cash or (ii) shares of the Common Stock. If the we elect to pay interest in shares of our common stock on
an interest payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued
and unpaid interest payable on such interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the
last sale price of the common stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately
preceding such interest payment date, or the average price, if the ADTV of the common stock for the ten (10) trading days prior
to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal to or greater than $100,000,
it will be the average price, and not the conversion price.
The outstanding principal amount of the
2012 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the 2012 notes plus accrued and unpaid interest thereon, by the conversion price
in effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2012 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933, as amended, without restriction as to volume or manner of sale, and (iii) the ADTV during such
30 trading day period equals or exceeds $500,000.
If an event of default as defined in the
2012 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 notes then
outstanding to be due and payable.
For so long as the 2012 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2012 notes, we
may not:
·
create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the 2012 notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;
·
permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2012 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and
·
permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock or such
subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii) purchase or otherwise acquire for
value, directly or indirectly, any shares or other equity security of us, other than the 2012 notes or 2012 warrants.
29
The 2012 warrants are exercisable at $5.00
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally,
the exercise price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of our common
stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the warrant if
such exercise would result in such holder's total ownership of our common stock exceeding 4.9%. The warrants expire on June
14, 2017.
In connection with the 2012 offering, we
paid a placement agent and another registered broker-dealer cash fees of approximately $274,000 in the aggregate. We issued to
the placement agent warrants, referred to as the Placement Agent Warrants to purchase 41,700 shares of common stock. The Placement
Agent Warrants contain substantially the same terms as those issued to subscribers.
We also entered into a registration rights
agreement with the subscribers. Pursuant to the registration rights agreement, we agreed to file a registration statement within
90 days after the final closing date of the 2012 offering which must occur no later than 30 days from June 14, 2012, or the Closing
Date, to register for resale the shares of common stock issuable upon conversion of the 2012 notes and exercise of the 2012 warrants
and Placement Agent Warrants, collectively referred to as the Registrable Shares. In the event that the SEC limits the number of
Registrable Shares that may be included in the registration statement, we shall include only those Registrable Shares permitted
by the SEC and shall file additional registration statements at the earliest practical date as we are permitted to do so in accordance
with SEC guidelines. We shall use our best efforts to cause (i) the Registration Statement to be effective within 150 days of the
closing date, and (ii) any additional registration statements to be declared effective within 90 days of the required filing date.
In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Shares an amount
equal to 1% of the original principal amount of the investor's 2012 note, multiplied by a fraction with the numerator equal
to the number of Registrable Shares that were required to be included in the Registration Statement which is not so filed, declared
effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total
number of shares issued or issuable to the Investor upon conversion of the 2012 notes and exercise of the 2012 warrants purchased
pursuant to the Subscription Agreement and owned by such holder.
Results of Operations
Nine Months Ended June 30, 2012
Compared to Nine Months Ended June 20, 2011
Revenues
were $477,290 for the nine months ended June 30, 2012 compared with $1,319,620 for the nine months ended June 30, 2011.  The
decrease was due to the rail-based parking system project that commenced in fiscal 2010 being substantially complete during the
first fiscal quarter of 2011.  This revenue was recognized using the percentage of completion method.
Cost of goods sold were $2,069,846 for the
nine months ended June 30, 2012 compared with $2,496,467 for nine months ended June 30, 2011.  The decrease was due to
the rail-based parking system project that commenced in fiscal 2010 being substantially complete during the first fiscal quarter
of 2011. In both years, cost of goods sold exceeded revenues due to the continued loss on the rack and rail project that commenced
in 2010. However, during the nine months ended June 30, 2012, we allocated additional resources that incurred expenses of approximately
$1,000,000 for the rail-based parking project that commenced in fiscal 2010. In addition to this, the Company incurred an expense
of $443,631 during the nine months ended June 30, 2012, related to the estimated loss that will be incurred on the rail-based
system.
30
Sales and marketing expenses were $877,831
during the nine months ended June 30, 2012 compared with $1,891,800 during the nine months ended June 30, 2011, for a decrease
of $1,013,969. The decrease was primarily the result of incurring a non-cash expense of $1,000,000 for the issuance of stock options
during the nine months ended June 30, 2011. Advertising expenses for the nine months ended June 30, 2012 and 2011 were $114,783
and $201,374, respectively. As of June 30, 2012 and 2011, we employed four full-time salesmen and one full-time support person,
whose salaries are recorded under sales and marketing expense.
General and administrative expenses were
$5,165,169 during the nine months ended June 30, 2012 compared with $6,842,084 during the nine months ended June 30, 2011, for
a decrease of $1,676,915. This decrease was primarily due to a reduction of approximately $3,250,000 in non-cash expenses incurred
in connection with issuances of stock options and warrants. Offsetting this reduction were increases of approximately $940,000
of costs related to fund raising, approximately $418,000 of payroll and payroll related expenses, and an increase of approximately
$200,000 related to professional fees.
Research and development expenses were $1,033,435
during the nine months ended June 30, 2012 compared with $1,792,653 during the nine months ended June 30, 2011, for a decrease
of $759,218. The decrease was due to less resources being needed to complete existing research and development projects during
the nine months ended June 30, 2012.
Depreciation and amortization expenses were
$183,907 during the nine months ended June 30, 2012 compared to $38,209 during the nine months ended June 30, 2011, for an increase
of $145,698. This increase was the result of placing the demonstration facility at Crystal Springs into service and purchasing
additional fixed assets during the nine months ended June 30, 2012.
Interest expense was $486,299 during the
nine months ended June 30, 2012, compared with $60,858 during the nine months ended June 30, 2011, for an increase of $425,441.
This increase is due to an increase in outstanding indebtedness due to the issuance of notes in the offerings in November and December
2011 and June 2012.
Financing costs were $0 during the nine
months ended June 30, 2012, compared with $3,899,866 during the nine months ended June 30, 2011. The expenses incurred during the
nine months ended June 30, 2011 were for the issuance of warrants related to drawing down on a line of credit.
In connection with the Offering, the Company
recorded a discount for the BCF and the attached warrants. In addition, the placement agent was granted warrants similar in their
terms to those issued to the debt holders. These warrants and the BCF were deemed not indexed to the Company's common stock
and accordingly the Company recorded a derivative liability. The derivative liability is required to be revalued at each interim
and annual reporting date until such time that it is settled. This revaluation resulted in a loss on fair value of derivative of
$2,579,818 during the nine months ended June 30, 2012. With respect to the 2012 Offering, the Company recorded a discount for the
BCF and the attached warrants. In addition, the placement agent was granted warrants similar in their terms to those issued to
the debt holders. The Company has determined that the 2012 Offering is indexed to the Company's common stock and has not
recorded a derivative liability. During the nine months ended June 30, 2012 the Company amortized an aggregate of $1,414,594 of
the of debt discount for the Offering and the 2012 Offering.
31
As of June 30, 2012, we had ten contracts.
Two contracts, both rack and rail parking projects, were in the process of being implemented. The other eight outstanding contracts,
all of which are for projects awaiting various approvals and financing which, if obtained, are expected to result in these contracts
generating revenue in the future for our company.  Because it is uncertain as to whether any of these projects will ever receive
the permitting or financing required to move forward, there can be no assurances that these contracts will generate any revenue. 
Of these eight contracts, one is for a rack and rail self-storage system, one is for a design contract for a RoboticValet™
parking system and the other six are for RoboticValet™ parking systems.
Fiscal Year 2011 Compared to Fiscal
Year 2010
Revenues were $1,591,948 for the fiscal
year ended September 30, 2011 compared with $718,530 the fiscal year ended September 30, 2010, for an increase of $873,418. The
increase was due to the continuing construction of a rail-based parking system that commenced in fiscal 2010. This revenue was
recognized using the percentage of completion method.
Cost of goods sold were $3,241,531 for the
fiscal year ended September 30, 2011 compared with $715,135 for the fiscal year ended September 30, 2010, for an increase of $2,526,396.
The increase was due to the continuing construction of the same rail-based parking system that commenced in fiscal 2010. We recognized
a gross loss of $1,649,583 for the year ended September 30, 2011, which included an expense of $188,484 as a provision for the
remaining loss to be incurred on the project. As a result of this being the first automated parking project of its size that we
have executed, we had a limited ability to properly estimate the time and resources required to fully design, engineer, manufacture,
ship, install, and commission prior to executing the project, and as a result our costs exceeded revenues.
Sales and marketing expenses were $2,176,724
during the fiscal year ended September 30, 2011 compared with $1,144,513 during the fiscal year ended September 30, 2010, for an
increase of $1,032,211. The increase was primarily due to an expense of $1,000,000 incurred from the issuance of 200,000 fully
vested options as executive compensation. Additional increases are due to payroll, travel and trade show expenses incurred by our
salesmen. The advertising expenses for the fiscal year ended September 30, 2011 and 2010 were $242,717 and $190,326, respectively.
General and administrative expenses were
$9,003,046 during the fiscal year ended September 30, 2011 compared with $11,652,419 during the fiscal year ended September 30,
2010, for a decrease of $2,649,373. This decrease was primarily due to our recognizing $5,201,040 in stock-based compensation during
the year ended September 30, 2011, as compared with $8,415,104 during the fiscal year ended September 30, 2010. Stock-based compensation
during the year ended September 30, 2011 was comprised of expenses aggregating $973,634 resulting from the grant of stock options
to purchase a total of 50,000 fully vested shares, 35,750 shares that have vested during the year ended September 30, 2011 and
43,750 shares that vest in the future, the grant of warrants totaling $4,202,406 as executive compensation to purchase a total
of 970,000 shares of common stock and $25,000 as compensation to a consultant to purchase a total of 5,000 shares of common stock.
These issuances were used to attract and retain employees and management and we intend to continue to issue equity as necessary
to retain our employees and management.
Research and development expenses were $2,202,020
during the fiscal year ended September 30, 2011 compared with $2,669,331 during the fiscal year ended September 30, 2010, for a
decrease of $467,311. This decrease was a result of us incurring less expense related to the research and development of a RoboticValet™
system.
32
Depreciation and amortization was $52,006
during the fiscal year ended September 30, 2011 compared to $49,089 during the fiscal year ended September 30, 2010, for an increase
of $2,917. This increase was the result of depreciation on additional fixed assets purchased during the fiscal year ended September
30, 2011.
Interest income was $1,796 during the fiscal
year ended September 30, 2011, compared with $5,977 during the fiscal year ended September 30, 2010, for a decrease of $4,181.
This decrease was the result of a note receivable to CSExpress, LLC being repaid in full by December 2010 as well as a decrease
in our overall cash balance in the bank.
Interest expense was $113,657 during the
fiscal year ended September 30, 2011, compared with $168,408 during the fiscal year ended September 30, 2010, for a decrease of
$54,751. This decrease was due to repayment and conversion of debt during the fiscal year ended 2010 as well as the conversion
of debt to equity that took place on November 24, 2010.
Financing costs were $3,899,866 for the
year ended September 30, 2011, compared with $0 for the year ended September 30, 2010. This increase was the result of recording
expenses from the issuance of warrants to purchase a total of 650,000 shares of common stock in connection with borrowings under
a line of credit.
As of the end of fiscal year 2011, we had
nine contracts. One contract, for a rack and rail parking project, was in the process of being implemented. Eight additional outstanding
contracts, all of which are for projects awaiting various approvals and financing which, if obtained, are expected to result in
these contracts generating revenue in the future for us. Because it is uncertain as to whether any of these projects will ever
receive the permitting or financing required to move forward, there can be no assurances that these contracts will generate any
revenue. Of these eight contracts, one is for a rack and rail self-storage system, one is for a rack and rail parking project,
one is for a design contract for a RoboticValet™ parking system and the other five are for RoboticValet™ parking systems.
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 have identified the accounting policies
below as critical to its business operations and the understanding of its results of operations.
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. We believe that a classified balance sheet provides a more meaningful presentation, consistent with the
business cycles of our operations. All significant inter-company accounts and transactions have been eliminated in consolidation.
Cash
and 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.
33
Accounts receivable
– 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,
2011 and June 30, 2012.
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.
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, 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, 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-Scholes method is also used.
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.
34
Revenue recognition
– Revenues
from the sales of RoboticValet™ and rack and rail systems are recognized using the percentage of completion method, whereby
revenue and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total
estimated project costs at completion. Project costs generally include all material and shipping costs, our direct labor, subcontractor
costs and an allocation of indirect costs related to the direct labor. Changes in the project scope, site conditions, staff performance
and delays or problems with the equipment used on the project can result in increased costs that may not be billable or accepted
by the customer and a loss or lower profit from what was originally anticipated at the time of the proposal.
Estimates for the costs to complete the
project are periodically updated by management during the performance of the project. Provisions for changes in estimated costs
and losses, if any, on uncompleted projects are made in the period in which such losses are determined.
When the current estimate of total contract
costs exceeds the current estimate of total contract revenues, a provision for the entire loss on the contract is made. Losses
are recognized in the period in which they become evident under the percentage-of-completion method. The loss is computed on the
basis of the total estimated costs to complete the contract, including the contract costs incurred to date plus the estimated costs
to complete.
We may have service contracts in the future
after the contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed
according to the terms of the contract.
Warranty Reserves
- We provide warranty
coverage on our products for a specified time as stipulated in its sales contracts. At the time of completion of a project we will
record a warranty reserve for estimated costs in connection with future warranty claims. The amount of warranty reserve is based
primarily on the estimated number of products under warranty and historical costs to service warranty claims. Management periodically
assesses the adequacy of the reserves based on these factors and adjusts the reserve accordingly.
Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting
Standards Update, referred to as ASU, No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs." The amendments in this ASU are effective during interim and annual periods beginning after December
15, 2011. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05,
"Presentation of Comprehensive Income." Under the amendments in this ASU, an entity has two options for presenting
its total comprehensive income: to present total comprehensive income and its components along with the components of net income
in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be
applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15,
2011, with early adoption permitted. The adoption of ASU No. 2011-05 will not have any material impact on our consolidated financial
position and results of operations.
In September 2011, the FASB issued ASU No.
2011-08, Intangibles — Goodwill and Other (Topic 350). This ASU amends FASB ASC Topic 350. This amendment specifies the change
in method for determining the potential impairment of goodwill. It includes examples of circumstances and events that the entity
should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after
December 15, 2011. The adoption does not have any material impact on our consolidated financial position and results of operations.
35
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.
36
OUR BUSINESS
Background and General Activities
Background
Our company, Boomerang Systems, Inc, is
engaged in the business of marketing, designing, engineering, manufacturing, installing and supporting its own line of fully automated
parking systems and fully automated self storage systems, with corporate and sales offices in Florham Park, New Jersey, and a research,
design, production and testing center in Logan, Utah.
Boomerang entered the business of automation
by developing and marketing automated self-storage systems to provide the space efficiency, security, and convenience of 100% "drive-up
accessible" vertical self-storage in densely populated urban locations with high real estate values. This system, which we
refer to as Boomerang's Automated Locker Retrieval System or ALRS, stores steel storage containers in a steel rack system
with a central open atrium and shuttles that move along a rail (i.e., "rack & rail") transport containers back
and forth between storage locations and ground floor loading bays.
While promoting our self storage system,
we received numerous inquiries to provide space-saving automated parking systems. In 2007, we began to develop automated parking
systems or APS, to expand our product line and enter that business. While we believe the automated self-storage has significant
potential, we believe the demand for automated parking systems is substantially larger.
To serve this market, we have developed
two automated parking product lines, which we refer to as "rack & rail" systems and "RoboticValet™"
systems. While our rack & rail systems compete with other rail or track based automated parking systems offered by other automated
parking providers, we believe that our RoboticValet system is unique in the marketplace with distinct advantages over other systems
historically offered by competitors.
Boomerang has the rights to various trademarks,
trade names or service marks used in our business including RoboticValet™ and TrafficMaster™. In addition, we have
filed patent applications with respect to certain aspects of our automated parking and self-storage systems.
General Activities
Since we entered the business of automation
in 2007, we have manufactured and implemented nine systems. Six of these systems were developed as prototypes at our testing center
in Utah. The first of these test systems was an automated self-storage system. The next three were rack & rail automated parking
systems, and the next two were RoboticValet parking systems. While these test systems have not generated any revenue for our company,
we believe the development of these systems has been instrumental in advancing our understanding of the business, our proprietary
technology and our implementation capabilities. In addition, being able to demonstrate these systems to prospective customers has
proven useful in advancing our sales efforts.
The other three systems that we have manufactured
were built for commercial use. Two of these systems were installed for third parties in 2008. The first system is a fully automated
self storage facility installed in New Kensington, a suburb of Pittsburgh, PA for a self storage operator with multiple locations
in the greater Pittsburgh area. The facility is a six level high steel rack system that houses 110 self storage containers, 60
of which are partitioned, so there are actually 170 leasable units in the system. Storage units in the system are retrieved and
delivered automatically to one of five drive up accessible loading bays when requested by tenants via a kiosk adjacent to the loading
bay or remotely via an access control panel upon the tenant entering the property. Following the opening of this facility in Pennsylvania,
we are aware of two automated self-storage facilities being implemented by a competitor.
37
The second system installed for a commercial
use in 2008 was a rack & rail automated parking system installed in San Juan del Rio, Queretaro, Mexico. This six level system
has the capacity to store eleven vehicles which can be retrieved to a ground floor loading bay via a kiosk. The system is used
by the customer for employee parking.
The third system in commercial use is an
APS, installed at the Crystal Springs Golf & Spa Resort complex in Sussex County, NJ on property owned by Route 94 Development
Corporation. Route 94 Development Corporation is principally owned by Gail Mulvihill, who also has a substantial ownership interest
in Boomerang and is the mother of Christopher Mulvihill, our President. The structure housing this system was built in 2010 and
the RoboticValet system was installed within the structure in 2011. Implementation of this system has not and will not produce
any revenue for us, however, we have the right to bring prospective customers to the site to demonstrate the system to them. While
we have been able to demonstrate our RoboticValet technology at our test facility in Utah, we believe that having this pilot facility
installed and operational provides prospective buyers a more substantial validation of the viability of our RoboticValet system,
since it serves as an demonstration of the RoboticValet system used in a commercial application. This facility also provides a
more convenient demonstration location for prospective customers located on the East Coast. This two level system is designed to
store up to 39 vehicles, with two ground level loading bays from which resort employees can store and retrieve vehicles. We received
the Certificate of Occupancy for this facility on October 3, 2011.
We are currently in the process of installing
another two automated parking systems, both of which are rack and rail systems. The first of these systems is being installed on
Collins Avenue in Miami Beach, Florida, for a national real estate developer. This eight level system is designed to store up to
139 vehicles with two ground level loading bays from which drivers can store and retrieve their vehicles.
The second rack and rail automated parking
system we are currently implementing is being installed at a museum in Stuart, Florida, where it is expected to be used to display
a collection of up to 55 antique cars. We anticipate these systems will be completed and operational prior to the end of 2012.
We have also entered into contracts to provide the following additional systems which we have not yet begun to install:
·
ALRS (Automated Locker Retrieval System) to accommodate up to 38,304 rentable square feet of self storage space in British
Columbia, Canada.
·
RoboticValet Parking System to accommodate up to 229 parking spaces in Wichita, Kansas.
·
RoboticValet Parking System to accommodate up to 460 parking spaces in Hudson County, New Jersey.
·
RoboticValet Parking System to accommodate up to 104 parking spaces in Abu Dhabi, UAE. (This project is contracted through
our joint venture, Boomerang Systems Middle East.)
·
RoboticValet Parking System to accommodate up to 854 parking spaces in Jackson, MS.
·
RoboticValet Parking System to accommodate up to 226 parking spaces in Hollywood, Florida.
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·
RoboticValet Parking System to accommodate up to 110 parking spaces in Virginia. (This contract is for system design, not the
purchase of a system).
·
RoboticValet Parking System to accommodate up to 248 parking spaces in New Jersey.
·
RoboticValet Parking System to accommodate up to 252 parking spaces in California.
·
RoboticValet Parking System to accommodate up to 309 parking spaces in California.
·
RoboticValet Parking System to accommodate up to 439 parking spaces in California.
We are in the process of designing these
systems which are currently under contract. At this time it is difficult to project when each of these contracted projects will
move forward and at what pace, because with each of these projects, the parking system is just one aspect of an overall larger
project such as an apartment building or hotel, and as such there are many factors outside our control that can affect the timing
of when our system is needed by our customer and when our customer can have the site will be prepared such that our system can
be installed.
It is also possible that in the course of
designing and engineering the system, we determine that we had previously underestimated the scope of the customer's requirements.
In such a situation, it is possible that we might not be able to negotiate an alternate solution and price with our customer which
might, in turn, result in a termination of our contract.
Previously, we estimated that we would start
manufacturing equipment for four additional projects (in addition to the two rack and rail parking projects) before the end of
calendar year 2012, but presently we estimate that we will commence manufacturing equipment for only one or two RoboticValet projects
before the end of 2012, and we estimate that we will commence manufacturing for five additional projects in calendar year 2013.
We expect that it will take an average of
about 12 months to manufacture and install a typical project., however, we have limited experience in executing projects of this
size and anticipate that executing multiple projects at the same time may affect our ability to deliver completed systems on a
consistent, timely basis.
We anticipate that revenue on these projects
will be recognized on a percentage of completion basis.
Generally, our agreements with customers
provide that:
·
our customers will purchase deliverables from us, consisting of equipment/materials and services, which, when combined, result
in a system that will be constructed to perform to certain specified criteria;
·
delivery of a working system is contingent upon a customer providing materials and services for which we were not contracted
to provide, in accordance with our specifications;
·
typically, we receive up front design fees before we commence design and engineering services;
39
·
the customer makes a series of progress payments to us as materials are fabricated, delivered, installed and tested, with final
payment typically being due 30 days following acceptance of the system by the customer;
·
the customer has the ability to terminate the contract if it is unable to obtain the necessary financing or approvals or if
there are material changes to the estimate we provided. If the customer terminates a contract, it must make any progress payments
due through the date of termination;
·
we typically provide a one-year warranty and, for a recurring monthly fee, an optional ongoing maintenance and service plan;
and
·
confidentiality agreements exist prohibiting our customers from sharing any of our proprietary information.
Product Lines
Automated parking systems
Even though conventional structured parking
garages (also known as multi-level parking, parking decks, parking garages, parkades, or parking ramps) are used extensively in
densely populated areas to minimize the amount of land consumed by parking, the three dimensional space consumed by these structures
still has a significant impact on the urban landscape. An alternative to these conventional parking structures is automated parking
systems or APS, which use machinery controlled by computers to automatically park vehicles in a structure without a human driver.
We have developed a proprietary APS that
we believe has the potential to yield many benefits to real estate developers, consumers and society in general including the following:
Maximum Parking Density
– By
using tandem parking, eliminating the ramps, circulation driveways and passenger lifts typical in self park garages, our APS consume
significantly less space per vehicle than conventional self park garages, especially in cases of small or irregularly shaped sites.
While valet parking services can also be used to attain density in parking garages, valet labor can be expensive and undesirable
for a number of reasons. The increase in density from APS is attractive to real estate developers who wish to minimize the impact
of parking on their project such that they can reduce the amount of excavation for underground garages or reduce the amount of
valuable space consumed for above ground garages.
Improved Parking Experience
–
Unlike self-park garages where parkers must hunt for a convenient space, remember where they parked, and risk the possibility of
minor damage to their vehicles, users of APS park and retrieve their car from the same spacious parking bays conveniently located
near the building's access points. The experience is similar to the convenience of a valet garage, but allows the drivers
to lock their car and retain their keys, allowing them to maintain privacy, while reducing the risk of theft or damage that may
occur by leaving their car in the hands of a stranger.
Fraud Prevention
– Parking
is a significant source of income in urban development projects, and parking garage operators are often one of the largest tenants
in the buildings they serve. With cash being handled by the operator and their employees, fraud can be a concern. Whether the employee
is under reporting income to the operator, or the operator is under reporting to the developer, there are opportunities for loss
and exposure that could prevent developers from realizing the full value of their parking assets. Installing an APS can mitigate
this issue by creating a record of every parking transaction, thereby exposing fraud.
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Lower Insurance Premiums
–
Parking garages often pay high insurance premiums because of the disproportionately high number of claims for accidents, vandalism,
theft, and personal injury that occur in parking garages. We believe that the elimination of human occupancy inside the parking
facility greatly mitigates these risks and should result in lower insurance premiums.
Environmentally Friendly
–
Because vehicles are shut off before they are parked, there are no carbon emissions generated in an APS, and in the case of enclosed
garages, significantly less electricity is required for ventilation. In addition, due to the space efficient nature of APS, significantly
less materials are used in construction. Additionally, the robots used in the garage do not require lights to see, reducing the
amount of electricity used.
Faster Construction Time
–
We believe that using an automated parking garage can shorten a project's construction timeline leading to lower borrowing
costs and earning rent several months earlier. This is especially the case when an APS is installed below ground because the increased
density of an APS allows for elimination of the lowest basements, which are the most time consuming and costly to build.
It is our belief that these benefits listed
above are evidenced by the widespread adoption of other APS in Europe and Asia. However, it should be noted that the U.S. market
has been slow to adopt these types of systems. While the number of these systems being built in the U.S. increased in recent years,
we believe the market has not realized its full potential for the reasons outlined below.
Prior to developing our flagship product,
the Boomerang RoboticValet APS, we studied the existing APS market. Our meetings with real estate developers, architects, parking
garage design consultants, traffic engineers, general contractors, parking operators and building and fire code officials led us
to believe that despite all the potential benefits these systems could offer, the market for existing rail and track based APS
technology was limited, for four primary reasons:
Redundancy Concerns
– Because
the machinery in a rack or track based APS system travels on a rail through the center of the structure, a breakdown of machinery
could result in the entire system or a large portion of the system becoming largely incapacitated until such time that the machinery
can be fixed. In our experience, the possibility of such a single point of failure represents a significant risk that most real
estate developers, operators and financial backers are not willing to take.
Throughput Concerns
–Use of
a central rail for the transport of machinery results in a system in which, on any given level, one piece of machinery cannot navigate
past another. This results in traffic bottlenecks which limit the number of simultaneous transactions that can be processed within
the system. We believe this limitation has been a major concern of traffic engineers, parking design consultants and operators
who need to confirm that the system is capable of handling the inbound and outbound traffic they project will be generated during
peak hours of operation.
Fire & Life Safety Concerns
–
Typical rack & rail systems require a floor-to-ceiling atrium in the center of the structure to accommodate retrieval machinery.
We believe building and fire officials have concerns that this floor-to-ceiling atrium results in a lack of fire separation between
levels as well as a falling hazard to fire and life safety personnel in the event they need to gain access to a burning car. Attempts
to mitigate the fire safety issues by adding catwalks, grating, and fire-proof coatings to the steel rack can make it cost prohibitive
to use rack & rail systems.
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Specialty Construction Concerns
–
While many architects, engineers, contractors and parking design consultants have experience with conventional solid concrete slab
garage structures, relatively few of these professionals have experience in the design, engineering or construction of specialized
steel rack structures or concrete shelf structures required to house a rail based automated parking system. We believe many real
estate developers are concerned that they cannot properly source these specialized structures to local professionals and would
prefer that the structure be sourced through the APS provider. We believe this poses a problem for APS providers, because it forces
them to be involved in the business of sourcing the structures to house their systems. We do not believe that is a scalable business
model, since local building conditions may vary considerably from market to market and requires the manufacturer to maintain a
physical presence in or near each market it intends to enter.
Boomerang's Rack & Rail
Automated Parking Systems
The first of our APS is a rail based product
line, which we refer to as our "Rack & Rail" line since these systems store vehicles in a steel rack structure.
We were able to develop our Rack & Rail parking system based on our self-storage technology. We believe these systems are substantially
similar to other competing rail or track based based systems already on the market. While our rack & rail technology does not
adequately address the four concerns listed above, we believe that rack and rail systems provide the advantages of APS systems
generally. We also believe we have an advantage in the United States over foreign producers of rail based APS, because their solutions
may have to be imported or licensed from foreign countries. In addition to test systems that we have installed at our factory in
Logan, Utah, to date we have installed a rack and rail APS in Mexico, and we are in the process of installing one in Miami Beach,
Florida and another in Stuart, Florida.
Boomerang's RoboticValet
System
The second type of APS that we manufacture,
and what we believe is our flagship line, is the Boomerang RoboticValet System. At this time, we believe we are the only automated
parking provider capable of providing this type of system, which is markedly different from rack & rail and track based systems
historically offered by our competitors.
The key component to this system is our
RoboticValet, an omni-directional, battery-powered robot that carries vehicles parked on self-supporting galvanized steel trays
to and from storage spaces by driving directly on a concrete slab surface without a rail. Unlike the machinery in our Rack &
Rail based systems, the RoboticValet can travel in any direction anywhere in the garage, including underneath rows of parked vehicles.
The three key design modifications, which
we believe provide the enhanced functionality that makes the our RoboticValet unique are:
Solid Concrete Slab Construction
Instead Of Custom Steel Racking
·
Fire fighter access is easier and safer due to elimination of the open atrium;
·
Acceptable and cost-effective fire separation between floors;
·
Maintenance personnel can service equipment without needing do a safety harness to service equipment;
·
Concrete is stronger, safer, easier to engineer, and can be competitively bid in local markets; and
42
·
Allows symbiotic relationship with industry players (No need for a design/build contract) such as local architects, structural
engineers and contractors who can participate in the process by sourcing the structure required to house the system.
Omni-Directional Robots Instead
Of Rail-Based Mechanisms
·
Navigate through large & irregularly shaped garages;
·
Move from floor-to-floor to react to demand spikes;
·
Avoid creating bottlenecks in high traffic areas;
·
Attain a higher throughput than a rail based system with less equipment;
·
Multiple paths of travel provide redundancy that can't be achieved in a central rail system; and
·
Easy to service. A disabled robot can be pushed into an empty parking space.
Self-Supporting Stacking Steel
Trays Instead Of Lifting Vehicles By Tires
·
Robots can move freely underneath parked vehicles avoiding bottlenecks
·
Multiple lanes of lateral movement means there is no single point of failure that can block traffic in the facility;
·
Vehicles lifted and moved without touching the vehicle;
·
Less likely to cause flat tires than systems that pick vehicles up by the tire, and fewer complications from packed snow, mud
flaps, and dangling mufflers; and
·
Stacking five or more trays eliminates the need to return empty trays each time a car exits.
Boomerang's Automated Locker
Retrieval System
In order to serve the self-storage market,
Boomerang has developed an ALRS that is a fully automated robotic self-storage system. This system allows self storage developers
to build vertically while keeping every rentable unit accessible to tenants from the ground floor. Our ALRS stores steel storage
containers in a steel rack with a central open atrium, where machinery moving along a rail transports containers between storage
locations in a steel rack and ground floor access bays. Containers are stored and retrieved by a tenants via an authorized access
code entered at a kiosk adjacent to drive up accessible loading bays located on grade. Containers can be partitioned and outfitted
with multiple access doors in order to allow for the creation of different sized rentable units.
We believe our ALRS provides customers with
the following benefits:
·
Greater Density
- This system yields a higher three dimensional density than can be achieved through conventional construction
methods resulting in more rentable square footage for the real estate developer.
43
·
Convenient Curbside Loading
- Consumers have the convenience of access directly from a drive-up bay instead of bringing
their goods into an elevator and through hallways inside a building
·
Improved Property Security & Personal Safety
- Containers are stored inside the system and are inaccessible to anyone
without the access code. All access is from a small central common area that is easy to monitor and secure.
·
Reduced Common Area Maintenance –
Our ALRS requires substantially less common area to maintain, reducing the labor
for tasks such as cleaning hallways and changing light bulbs.
·
Remote Over-Locking Capability -
Tenants who are past due on rent can be automatically locked out of the system (over-locked)
at the push of a button.
·
Reduced Fraud –
Opportunities for uncollected rents (due to employee fraud or negligence) are reduced, since there
is a record logged every time a unit is stored or retrieved in the system.
Marketing
We employ four full-time salespeople and
one full-time support person. In addition, we retain independent representatives to market our system. We have also retained consultants
to assist us with new contracting opportunities in the United States and abroad. These consultants will typically receive a fee
equal to a percentage of any monies received by the Company on a particular project.
Our marketing activities are principally
directed at identifying and understanding potential customers and markets and educating government agencies, architects, engineers,
and contractors, as well as potential customers about our products and services. We are currently focused on markets in the United
States and Abu Dhabi, United Arab Emirates as well as elsewhere in the Middle East and India. We target the following markets:
public garages, hospitals, casinos, hotels, airports, residential apartments and condominiums, office complexes, car dealerships
and service facilities, and universities.
We utilize the RoboticValet demonstration
unit in our manufacturing facility in Logan, Utah to demonstrate the capabilities of our system to potential customers. In addition,
the small RoboticValet parking facility we installed in 2011 at Crystal Springs Golf & Spa Resort in the town of Hamburg, located
in the township of Hardyston, New Jersey not only functions in a commercial environment, but it also serves as a "show room"
for our customers, since we have an agreement with the resort that provides us access to the facility for the purpose of conducting
demonstrations. We received the Certificate of Occupancy on this demonstration facility in October 2011.
In June 2009, our wholly owned subsidiary,
Boomerang USA Corp. entered into a Shareholders Agreement with Tawreed Companies Representation, an entity established under the
laws of the Emirate of Abu Dhabi and the United Arab Emirates, to expand our business into Abu Dhabi and possibly elsewhere. The
material terms of the Shareholders Agreement are listed below:
·
Pursuant to the agreement, the parties incorporated Boomerang Systems Middle East LLC, referred to as BSME, a limited liability
company in the Emirate of Abu Dhabi on July 21, 2009.
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·
The duration of BSME is 5 years and will automatically be renewed for similar terms unless one party notifies the other of
its willingness to dissolve BSME 90 days before the expiration date.
·
Tawreed and Boomerang USA own 51% and 49%, respectively, of BSME, and all profits are to be split evenly and each party is
required to contribute an equal amount of capital when needed.
·
The board of directors is comprised of four members, with each party appointing two directors.
·
The agreement provides that Boomerang USA will supply BSME with systems at a price that Boomerang USA will receive a fair profit
margin. BSME may determine the price at which it sells systems to its customers.
·
All intellectual property rights will remain the sole property of Boomerang USA at all times.
To date BSME has generated only a small
deposit. BSME currently employs one full time architect who supports our sales and marketing efforts. To date, BSME has secured
one contract for a RoboticValet system to be installed in Abu Dhabi for 104 parking spaces. We are not certain of when we will
begin manufacturing or installing equipment for this project, because the developer is still seeking to secure financing and permitting
for the project.
In February 2012, our wholly owned subsidiary,
Boomerang MP Holdings Inc., entered into an agreement with Stokes Industries-USA, LLC, to form a joint venture for the purpose
of marketing, selling and installing mechanical parking systems in North America. The material terms of the joint venture agreement
are listed below:
·
Pursuant to the agreement, the parties incorporated Boomerang-Stokes Mechanical Parking LLC, referred to as BSMP in the state
of New Jersey on February 15, 2012. The joint venture is authorized to do business as Boomerang Mechanical Parking.
·
Unless all directors and members shall mutually agree, the agreement shall continue in effect until January 1, 2018.
·
Boomerang MP Holdings and Stokes Industries are each 50% owners of BSMP and share equally in all profits and losses. Boomerang
MP Holdings will provide the initial $250,000 of capital required by BSMP to fund operations and marketing efforts over a two-year
period, of which approximately $115,000 has been awarded as of June 30, 2012.
·
The board of directors of BSMP is comprised of four members, with each party appointing two directors.
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Sales
We currently have twelve contracts (including
the projects currently being implemented in Miami Beach, Florida, Stuart, Florida and the contract through Boomerang Systems Middle
East) to purchase our systems and are in active negotiations with other prospective customers as well as one contract for designing
our system into a prospective project. We have received deposits on all but two of our twelve current contracts, and we anticipate
that these contracts will all generate revenue, however, because we do not have a long track record of implementing these systems
commercially, we may not be able to accurately forecast our costs, profitability and receipt of revenue. Furthermore, because we
have entered into these contracts early in the planning period on projects that remain subject to substantial financial, permitting
and other uncertainties, there is no assurance that they will not be terminated. In such cases, there will be a substantial risk
that we will not realize all of the revenue that we otherwise would if the project was completed and that we may incur a loss on
such contracts. On future contracts, we intend to require a non-refundable payment at the time we enter into the contract with
progress payments generally related to our incurrence of expenses in connection with the contract.
In our experience, in order to sell our
systems, we typically need to be involved in the early planning stages of a project, resulting in a sales cycle can be from six
months to multiple years typically leading up to a contract being executed around the time the developer expects to gain planning
approvals. From the time that planning approvals are gained, it will typically take between six and twelve months for a developer
to prepare construction drawings and to receive permitting and construction financing so that construction of the project can commence.
Depending on the nature of the overall project which may or may not include much more than just a parking system, the site will
typically be ready for us to begin installation of our equipment after another six to twelve months from the start of construction.
This means that we will typically start installing our equipment one to two years from the time we secure a contract, but because
we will have to provide preconstruction services to help the developer obtain planning approvals and permitting, we will typically
generate a limited portion of the contract revenue within six months of signing a contract. In addition we will require progress
payments as we order materials and begin fabrication of equipment in advance of the installation, and we anticipate that we will
typically start generating revenue from fabrication activities at least six months prior to the start of the installation.
Manufacturing & Installation
We currently lease two manufacturing facilities
in Logan, Utah. At these facilities we manufacture the steel components for the structures for our ALRS and rack and rail parking
systems, storage containers for our ALRS and steel trays for our parking systems as well as the mechanical and robotic sub-systems
for all of our systems. 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 and installed under our supervision. We also provide, for an additional
charge, construction services for our ALRS and Rack & Rail parking systems, if requested.
The construction period for the system at
its intended location will depend on upon the type, size and configuration of the system. In the case of our ALRS and Rack &
Rail automated parking systems, we expect the implementation of the system onsite would take at least six months and because these
systems require construction of a steel rack system that must be installed under our supervision, and depending on the constraints
of the site, the nature of the rest of the project, and local work conditions, such an implementation could take substantially
longer. By contrast, we would install the equipment for our RoboticValet system into a concrete deck structure provided by the
client, which results in a significant simplification of our installation process. We anticipate that with this approach we could
install systems in as little as three months once the customer's structure is prepared. Our customers will be responsible
for obtaining all local and other governmental permits and approvals to construct the structure at their intended location.
Research and Development
For the years ended September 30, 2011 and
2010, the Company incurred $2,202,020 and $2,669,331 for research and development, respectively.
46
Inventory and Working Capital
We do not currently maintain an inventory
of completed parking or self-storage systems available for sale and only maintain a limited partial inventory of certain of the
components or sub-assemblies for these systems. Even though we anticipate that each system we implement would be different in its
configuration, many of the components and sub-assemblies are standardized and could be stocked. Establishing a more extensive inventory
will depend upon our ability to establish sales volume in the future and our cash position at such time. At the present time, our
working capital together with cash from ongoing projects are sufficient to support our marketing activities, administrative requirements
and existing projects. However, to implement our full business plan, we may require additional funds. We anticipate receiving deposits
and partial completion payments sufficient to manufacture and install systems when ordered.
Competition
We experience intense competition from others
in the manufacturing and marketing of our automated parking systems and storage systems. We have identified more than ten competitors
engaged in the manufacture and marketing of automated parking systems, and one engaged in manufacturing and marketing automated
self-storage systems. Some of our competitors are divisions of large multi-national enterprises and as such are better capitalized
than we are. They have also been in business longer than we have, have an installed project base, established relationships with
potential customers and others in the parking industry and have access to greater technical resources than those available to us.
While we do not believe that any of our competitors are capable of delivering a system substantially similar to our RoboticValet
at this time, we do believe that such a system could be developed by other manufacturers of automated parking systems, and based
on the positive reception we have received from the market for our RoboticValet product, we believe our competitors will attempt
to develop a similar system if they are not doing so already. In addition, manufacturers of automated materials handling warehouse
systems not in the automated parking business may seek to manufacture systems in competition with us. Other automated parking and
self-storage systems are available from both domestic and foreign manufacturers, and it can be anticipated that others will seek
to enter the market. We also compete with traditional parking and storage systems which are more economically viable in cases where
land and space are not as valuable.
We intend to seek to achieve a competitive
advantage over other parking and self-storage facilities as follows:
·
By keeping our systems cost effective by making them simple to build, operate and maintain.
·
By focusing 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 customers.
·
In the domestic market, by maintaining our primary production facilities within the continental United States thereby enhancing
our ability to deliver and construct systems with greater speed and fewer logistical issues and lower shipping costs.
We believe our RoboticValet system represents
an advance in automated parking and will provide us with a significant competitive advantage in system performance and an ability
to provide developers with a system which is more easily approved by governmental entities.
47
Employees
As of September 13, 2012, we had 54 full-time
employees and 4 part-time employees. Of these, 23 full-time employees are in executive and general and administrative positions,
15 full-time employees and 3 part-time employees are engaged in design, 2 full-time employees are engaged in project management,
9 full-time employees and 1 part-time employee are engaged in manufacture and operations activities, and 4 full-time employees
and 1 full-time support employee are engaged in sales activities.
Prior Activities
Boomerang Systems, Inc., or Boomerang Utah,
was incorporated on December 6, 2006. From inception through the first quarter 2008, Boomerang Utah was a developmental stage company
doing research and development 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., or Digital, from Dominion Resources Inc.
On February 6, 2008, we completed the acquisition
of the business, assets and liabilities of Boomerang Utah by the merger of the Boomerang Utah into a wholly owned subsidiary of
ours. We issued as consideration for the acquisition 666,667 shares of our Common Stock. In connection with the closing of the
merger we (i) completed a private placement of 100,000 shares of our Common Stock pursuant to a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, resulting in net proceeds to us of approximately $1,700,000, (ii) effected
a one-for-fifteen reverse stock split of our outstanding shares and (iii) filed an amendment to our Certificate of Incorporation
with the State of Delaware effecting a change in our corporate name to Boomerang Systems, Inc.
On February 6, 2008, our company was recapitalized
to give effect to the acquisition of Boomerang Utah. Under generally accepted accounting principles, our acquisition of Boomerang
Utah is considered to be a capital transaction 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 our 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 666,667 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, our business has become the business of the Boomerang Utah.
Subsequent to the acquisition of Boomerang
Utah, the shareholders of Boomerang Utah owned approximately 80.9% of our then outstanding shares. As the acquisition of Boomerang
Utah was a capital transaction, and not a business combination, there is no assigned goodwill or other intangible asset resulting
from the acquisition.
The Company was a developmental stage company
through the first quarter of fiscal 2008.
48
Properties
We entered into a five year lease, commencing
on December 1, 2011, for principal office space, consisting of approximately 7,350 square feet, located at 30 B Vreeland Avenue,
Florham Park, NJ. This is also the location of our sales and marketing activities. See Financial Statement Note 13 – Commitments
and Contingencies for terms of this lease, included elsewhere in this prospectus.
Manufacturing is undertaken at 324 West
2500 North, Logan, Utah. A total of approximately 50,150 square feet for manufacturing, office and conference room space is subject
to lease agreements with SB&G Properties and Stan Checketts Properties, both of which are related parties. See Note 12 to Notes
to Consolidated Financial Statements, included elsewhere in this prospectus. These leases expired in September 2011. Amendments
to both leases were entered into on October 1, 2011, extending the leases on a month-to-month basis. If we are unable to extend
these leases in the future, we will need to find another manufacturing facility, which may have an adverse impact on our operations.
Legal Proceedings
Although we believe we are not a defendant
in any material pending legal proceedings, we may from time to time become involved in litigation relating to claims arising from
the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial
and managerial resources.
49
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and
their ages as of September 13, 2012 are as follows:
Name
Title
Age
Mark Patterson
Chief Executive Officer and Director
51
Christopher Mulvihill
President and Director
42
Scott Shepherd
Chief Financial Officer
44
David Koch
Chief Operating Officer
59
Maureen Cowell
Secretary and Director
46
Stanley J. Checketts
Director and Chief Executive Officer of Boomerang Sub, Inc.
71
Joseph R. Bellantoni
Director
50
Steven C. Rockefeller, Jr.
Director
52
Kevin M. Cassidy
Director
56
Anthony P. Miele, III
Director
41
Each director serves for a term of one year
and until his or her successor is duly elected and qualified.
All of our directors bring to our Board
executive leadership experience derived from their service as senior executives and, in many cases, founders of industry or knowledge
specific consulting firms or operational businesses. Some offer extensive public company board experience. Each of our board members
has demonstrated strong business acumen and an ability to exercise sound judgment and has a reputation for integrity, honesty and
adherence to ethical standards. When considering whether directors and nominees have the experience, qualifications, attributes
and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of
the company's business and structure, the Corporate Governance and Nominating Committee and the Board of Directors focused
primarily on the information discussed in each of the Directors' individual biographies and the specific individual qualifications,
experience and skills as described below:
Mark Patterson.
Mr. Patterson is
the Chief Executive Officer and a Director of our Company and has served in such capacity since August 2010. From January of 2009
until joining the Company in June of 2010 as an Executive Vice President, Mr. Patterson was a real estate consultant. Until January
of 2009, Mr. Patterson was a Managing Director and the Head of Real Estate Global Principal Investments at Merrill Lynch, where
he oversaw the real estate principal investing activities of Merrill Lynch. Mr. Patterson joined Merrill Lynch in April 2005 as
the Global Head of Real Estate Investment Banking and in 2006 also became the Co-Head of Global Commercial Real Estate which encompassed
real estate investment banking, principal investing and mortgage debt. Prior to joining Merrill Lynch, Mr. Patterson spent 16 years
at Citigroup where he held numerous positions including the Global Head of Real Estate Investment Banking since 1996. Mr. Patterson
is a member of the Board of Directors of General Growth Properties, a company traded on the New York Stock Exchange under the symbol
GGP. During his career, Mr. Patterson has been involved in a wide variety of financing and investing activities that have spanned
virtually all types of real estate in most major global property markets. Mr. Patterson's day to day leadership of our company,
as Chief Executive Officer, provides him with intimate knowledge of our business, results of operations and financial condition.
Mr. Patterson, as a result of experience in the real estate investment banking industry, provides unique insights into our target
customers as well as our challenges and opportunities.
50
Christopher Mulvihill.
Mr. Mulvihill
has been employed as President and Manager of Sales and Marketing of our company since February 2008, and prior thereto served
in that capacity for Boomerang Utah from January 2007 to February 2008. Mr. Mulvihill was appointed as a Director of our Company
in May 2011. From August 2005 to January 2007, he was employed by The Active Network, Inc., a provider of online registration software
and event management software, as the Director of Business Development for Golf. From January 2002 to July 2005, Mr. Mulvihill
was the founder and President of Tee Time King, Inc., a provider of golf reservation, inventory management and point of sale software,
which grew to become the country's largest municipal golf course reservation company before being sold to The Active Network,
Inc. in August 2005. As President of our company, Mr. Mulvihill provides significant experience in sales, management and commercial
issues associated with technology based businesses which comprise an important aspect of our business.
Scott Shepherd
. Mr. Shepherd has
served as our chief financial officer since January 18, 2012. Prior thereto, he served as our controller from February 2011 until
January 2012. Mr. Shepherd served as corporate controller for heavy equipment manufacturer and distributor, Komatsu Equipment Company,
from July 2009 to February 2011. From May 2008 to July 2009, he served as Chief Financial Officer for The Levitin Group, an online,
interactive computer based training company. He worked for Eskay Corporation (subsequently merged with Daifuku America Corporation),
a global automated material handling company from 1995 to 2008 and served as its Chief Financial Officer from 2000 until May 2008.
David Koch.
Mr. Koch is the Chief
Operating Officer of our Company and has served in such capacity since August 2011. He has been involved in the Automated Materials
Handling Industry for over 34 years. Mr. Koch has held positions of Sr. Mechanical Engineer, Principle Systems Engineer, Sr. Project
Manager, Sr. VP of Engineering, Sales, and Marketing as well as Co-Founder & President of ESKAY Corporation (a joint venture
with Daifuku Materials Handling Co.) in North America from 1990 to 2005. From September 2005 to October 2010, Mr. Koch served as
the Director of Sales and Marketing for Power Automation System, a company specializing in automated storage and transportation
systems, and from October 2010 to July 2011, Director of Business Development for the North American Division of Dematic Corporation,
an automated material handling company. Mr. Koch has extensive experience in logistics and automated warehousing, distribution
and manufacturing across all industries and has experience working with companies in North America, Europe and Asia. Mr. Koch has
also served in many volunteer leadership positions for over 20 years in the Materials Handling Industry of America (MHIA) most
recently served on the Roundtable Advisory Committee to the board of governors.
Maureen Cowell.
Ms. Cowell was the
Secretary of Digital Imaging Resources, Inc. since July 2007 and has remained so through the merger with Boomerang in February
2008. Ms. Cowell also became a Director of Boomerang on April 14, 2009. Ms. Cowell is also employed as Vice President of North
Jersey Management Services, Inc., a private company providing accounting and financial record-keeping services since December 1995.
Ms. Cowell has managed dozens of small private development stage corporations since 1992. Ms. Cowell has a comprehensive knowledge
of accounting, financial reporting, financial strategies, corporate governance and compliance.
Stanley J. Checketts.
Mr. Checketts
has served as our Director and the Chief Executive Officer and director of our wholly-owned subsidiary, Boomerang Sub, Inc., positions
he has held since February, 2008. Prior thereto, he was the founder and Chief Executive Officer of S&S Worldwide, Inc., or
S&S, from 1994 to 2009. S&S is a world leader 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. Checketts
has commenced developing, manufacturing and selling amusement rides through Stan Checketts Properties. Mr. Checketts had encountered
success in his past endeavors and brings insight to our challenges, along with strong leadership skills.
51
Joseph R. Bellantoni.
Mr. Bellantoni
has served as a director since February 2008. Mr. Bellantoni was Chief Financial Officer and a Director of Digital Imaging Resources,
Inc. from January 2007 until we acquired it and then served as our Chief Financial Officer from February 2008 until January 2012.
Mr. Bellantoni previously served as a director of Digital Imaging Resources, Inc. and as its Treasurer from April 1995 until November
2004. Mr. Bellantoni has also served as President of North Jersey Management Services, Inc, a private company providing accounting
and financial record-keeping services, since December 1995. North Jersey Management provides accounting and financial services
to Crystal Springs. Mr. Bellantoni possesses extensive knowledge of accounting, corporate governance, corporate compliance, financial
reporting and financial strategies, which has been an asset to our company in its development stage and ongoing operations.
Steven C. Rockefeller, Jr.
Mr. Rockefeller
has been a Director Since February 2010. He currently serves as Chairman and Chief Executive Officer of Rose Rock Capital where
he has worked since 2010. Rose Rock Capital is a family-owned Hong Kong holding company in the business of fund management and
development for real estate and infrastructure in China. In 2010, Mr. Rockefeller was honored to accept appointment from Executive
Vice Chairman Xiao Wunan as Co-Chairman of the Asia Pacific Exchange & Cooperation Foundation (APECF), which, among other things,
focuses on development of Non Governmental Organizations public policy, religious respect and understanding, and philanthropy.
Since 2009 Mr. Rockefeller has served as a Visiting Professor at Nankai University. From 2000 to 2004, Mr. Rockefeller was a Board
Member of Grameen Foundation and Chairman of its Development Committee, and since 2009, Mr. Rockefeller has served as Special Advisor
on poverty alleviation to the Chairman of Rimbunan Hijau Group in Sibu, Malaysia. In recognition of his lifelong dedication to
poverty alleviation, Mr. Rockefeller received a Fulbright Award. Mr. Rockefeller currently serves on the board of directors of
two private companies, BioChemics (since 2005) and Tracer (since 2008). Since 2009, Mr. Rockefeller has served on the advisory
board of Sparta Commercial Services, Inc. From 1999 to 2004, Mr. Rockefeller served as a Managing Director of Deutsche Bank. Mr.
Rockefeller has a broad range of experience across many industries, including international real estate, and we believe he provides
valuable insight to our Board.
Kevin M. Cassidy.
Mr. Cassidy has
served as our Director since May 2010. Mr. Cassidy is currently the Managing Member of Logic International Consulting Group, LLC,
a consulting firm he formed in October, 1996, that specializes in the development of global trading businesses and the creation
of the requisite infrastructure, management and support paradigms of said platforms. From September 2002 to December 2008, Mr.
Cassidy was a Partner and Chief Operating Officer of Archeus Capital Management, LLC, which is a multi-strategy hedge fund. Mr.
Cassidy's knowledge in a range of business functions, including raising capital, leasing and corporate administration, provides
insight to our Board.
Anthony P. Miele, III.
Mr. Miele
has served as our Director since May 2010. Mr. Miele has been a Partner of White Honey, which offers a full spectrum of professional
photography of luxury fragrances for high profile clients, since August 2009. Mr. Miele was employed by Ricoh Business Solutions
as an Account Executive from August 2006 to July 2009. Mr. Miele was formerly employed by Tyco ADT Security Systems as a Small
Business Sales Representative from August 2005 to June 2006. Prior thereto, Mr. Miele was a sales trader on the New York Stock
Exchange from August 2003 to August 2005. Through his past work experiences, Mr. Miele has been involved with companies that were
in all stages of development which provides the Company with useful insight.
52
Independence of the Board of Directors
We are not a "listed issuer"
as such term is defined in Rule 10A-3 under the Exchange Act. We use the definition of independence of The NASDAQ Stock Market
LLC. The board has determined that Messrs. Rockefeller, Cassidy and Miele are independent. Each current member of the Audit Committee,
Compensation Committee and Nominating Committee is independent and meets the applicable rules and regulations regarding independence
for such committee, including those set forth in pertinent NASDAQ listing standards, and that each member is free of any relationship
that would interfere with his individual exercise of independent judgment.
Audit Committee and Audit Committee
Financial Expert
Our Board of Directors has appointed an
Audit Committee which consists of Messrs. Rockefeller and Cassidy. Each of such persons has been determined to be an "independent
director" under the listing standards of the NASDAQ Capital Market, which is the independence standard that was adopted by
our Board of Directors. Mr. Cassidy has been appointed as the Company's Audit Committee Financial Expert by our Board of
Directors. The Audit Committee operates under a written charter adopted by our Board of Directors. The Audit Committee assists
the Board of Directors by providing oversight of the accounting and financial reporting processes of the Company, appoints the
independent registered public accounting firm, reviews with the registered independent registered public accounting firm the scope
and results of the audit engagement, approves professional services provided by the independent registered public accounting firm,
reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees
and reviews the adequacy of internal accounting controls.
Compensation Committee
Our Board of Directors has appointed a Compensation
Committee consisting of Messrs. Miele and Rockefeller. Each of such persons has been determined to be an "independent director"
under the listing standards of the NASDAQ Capital Market. Our Board of Directors has adopted a written Compensation Committee Charter
that sets forth the committee's responsibilities. The committee is responsible for determining all forms of compensation
for our executive officers, and establishing and maintaining executive compensation practices designed to enhance long-term stockholder
value.
Executive Compensation
2011 Summary Compensation Table
The following table sets forth the compensation
of our principal executive officer and our other most highly compensated executive officers (who we collectively refer to as "named
executive officers") who received total compensation exceeding $100,000 for the year ended September 30, 2010 and who served
in such capacity at September 30, 2011.
Name
and Principal Position
Year
Salary
Bonus
Stock
Award
Option
Award
Non-Equity Incentive
Plan Compensation
Nonqualified
Deferred
Compensation
All Other
Total
(a)
(b)
($)
(c )
($)
(d)
($)
(e)
($) (1)
(f)
($)
(g)
($)
(h)
($)
(i)
($)
(j)
Mark Patterson
2011
200,000
-0-
-0-
4,202,406
(2)
-0-
-0-
-0-
4,402,406
CEO(2)
2010
23,000
-0-
700,000
(2)
699,998
(2)
-0-
-0-
315,000
(3)
1,737,998
Christopher Mulvihill
2011
150,000
-0-
-0-
1,000,000
(4)
-0-
-0-
-0-
1,150,000
President and Manager of Sales and Marketing
2010
150,000
-0-
-0-
-0-
-0-
-0-
-0-
150,000
Stanley J. Checketts
2011
100,000
-0-
-0-
-0-
-0-
-0-
-0-
100,000
CEO, Boomerang Sub, Inc. (5)
2010
100,000
-0-
-0-
5,049,077
(5)
-0-
-0-
-0-
5,149,077
Joseph Bellantoni former
2011
39,000
-0-
-0-
-0-
-0-
-0-
-0-
39,000
CFO(6)
2010
13,750
-0-
-0-
279,998
(6)
-0-
-0-
-0-
293,748
53
(1)
Represents the grant date fair value in accordance with ASC 718 (formerly FAS 123R). See Note 11 to Notes to Financial Statements
for the year ended September 30, 2011 for a description of valuation assumptions used in the calculation of grant date fair value.
(2)
Mr. Patterson commenced service as our Executive Vice President in June 2010 and then became our Chief Executive Officer effective
August 21, 2010. As part of his employment agreement as Executive Vice President, Mr. Patterson received 140,000 shares of the
Company's common stock. The Company recognized $700,000 in expense for this issuance of common stock based on a value of
$0.25 per share on the date of issuance. In addition, Mr. Patterson received 140,000 warrants to purchase the Company's common
stock, exercisable at $5.00 per share. The Company recognized $699,998 in expense for this issuance of warrants. During fiscal
year 2011, a total of 970,000 warrants to purchase shares of the Company's common stock, exercisable at $5.00, vested per
Mr. Patterson's employment agreement. The Company recognized $4,202,406 in expense for these issuances.
(3)
Pursuant to Mr. Patterson's employment agreement, we agreed to pay the Federal and state income taxes on behalf of Mr.
Patterson as a result of his receipt of 140,000 shares of our common stock.
(4)
In October 2010, Mr. Mulvihill received 200,000 options to purchase the Company's common stock exercisable at $5.00 per
share.
(5)
In February 2010, Mr. Checketts received 250,000 options to purchase the Company's common stock, exercisable at $2.00
per share.
(6)
In February 2010, Mr. Bellantoni received 20,000 options to purchase the Company's common stock, exercisable at $2.00
per share.
Narrative Disclosure to Summary
Compensation Table
Employment
Agreements
In June 2010, the Company entered into an
employment agreement with Mark Patterson to serve as our Executive Vice President. As part of the compensation, the Company issued
warrants to purchase 140,000 shares of common stock with an exercise price of $5.00 per share. The Company has agreed to pay all
Federal and State income taxes incurred by the Executive as a result of receiving the common shares and recognized $700,000 in
expense for the issuance of these common shares. In addition, the Company recognized $315,000 in expense for the related tax effect
of the above transaction. Mr. Patterson was also issued 140,000 warrants in June 2010 pursuant to his employment agreement. The
Company recognized $699,998 in expense for the issuance of these warrants. These warrants were cancelled during the fourth quarter
of 2010 and this agreement was subsequently amended and restated in October 2010 to include warrants to purchase a total 280,000
shares of common stock exercisable at $0.25 per share.
On August 21, 2010, the Company entered
into an Employment Agreement with Mark Patterson, to serve as the Company's Chief Executive Officer, which was amended and
restated on October 1, 2010. The amended agreement provides for a base salary of $200,000 and provides for a grant of an aggregate
of 1,080,000 five-year warrants with an exercise price of $5.00 per share that vested and became exercisable as to 270,000 shares
on October 1, 2010, and vest and become exercisable as to 210,000 shares on each of February 1 and August 1, 2011 and February
1, 2012, and 180,000 shares on August 1, 2012. The amended agreement provides Mr. Patterson with a right of first refusal, pursuant
to which Mr. Patterson has the right, but not the obligation, to maintain his then pro rata share of the Company's issued
and outstanding shares and warrants by purchasing additional shares and warrants each time the Company offers shares and/or warrants
for sale.
54
Mr. Mulvihill is employed as our President
and Manager of Sales and Marketing pursuant to a five-year agreement, as amended, expiring on October 31, 2016. Pursuant to the
agreement, Mr. Mulvihill receives a commission of 3% of the gross sales of our products, with a non-refundable advance against
commissions of $60,000 per year. As additional compensation, the Company agreed to grant Mr. Mulvihill options to purchase 200,000
shares vesting immediately, exercisable at $5.00 per share for a term of 10 years. These options were granted in October 2010.
The Company entered into an employment agreement
with David Koch on October 28, 2011, effective as of August 1, 2011. The agreement will continue in effect until terminated by
us or Mr. Koch. Mr. Koch is the Company's Chief Operating Officer. His compensation package includes an annual base salary
of $150,000, a stock bonus of 11,765 shares of common stock after being employed with the Company for six months which would vest
after one year of employment and a discretionary stock option grant upon a favorable performance review after his one year anniversary.
We will reimburse him up to $2,000 per month for travel.
Non-Compete
Agreement
Mr. Checketts is a party to a Non-Compete
Agreement with us dated December 10, 2007. The agreement was entered into in connection with our acquisition of Boomerang Utah.
He has agreed that for a period expiring three years after the date of termination of his employment he will not use his technical
knowledge concerning our business for the benefit of any other company or party engaged in our business in the United States. In
addition, he has agreed that during the period of this restriction he will keep secret and retain in confidence and will not use
in competition with us any of our confidential information.
Outstanding Equity Awards at September
30, 2011
The following table reflects the equity
awards granted by us to the named executive officers that remain outstanding at September 30, 2011:
Equity Awards
Name and
Grant Date
Number of
Securities
Underlying
Unexercised
Option (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options ($)
Unexercisable
Option
Exercise Price
($)
Option Expiration
Date
Mark Patterson
October 1, 2010
690,000
390,000
(2)
$
5.00
October 1, 2015
Mark Patterson
November 12, 2010
280,000
(1)
—
$
5.00
November 11, 2015
Christopher Mulvihill
October 6, 2010
200,000
(1)
—
$
5.00
October 5, 2020
Stanley J. Checketts
February 15, 2010
250,000
(1)
—
$
2.00
February 14, 2020
Joseph Bellantoni
February 2, 2010
20,000
(1)
$
2.00
February 1, 2020
(1)
These options vested in full on the date of grant and are currently exercisable.
(2)
These warrants vested as to 210,000 shares on February 1, 2012, and 180,000 shares on August 1, 2012.
55
Director Compensation
Our Directors received no cash compensation
during the years ended September 30, 2011 and September 30, 2010, other than the compensation paid to our named executive officers
who are also Directors, which is reflected in the Summary Compensation Table above. Steven C. Rockefeller, Jr., one of our Independent
Directors, received an aggregate of 60,000 immediately exercisable five-year warrants, with an exercise price of $2.00 per share
as an inducement to and in connection with his Board service; 50,000 of these warrants were granted in February 2010 and 10,000
were granted in March 2010.
Our Directors are reimbursed for their out-of-pocket
expenses incurred in connection with attending meetings.
56
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Transactions with related persons
HSK Funding, Inc., Lake Isle Corp., and
Venturetek, LP, are beneficial holders of shares of our company and certain of their members and stockholders are also the members
of SB&G Properties, LC., or SB&G, which is the landlord under a lease with us. Gail Mulvihill, the individual who exercises
sole voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our President and is a principal
stockholder of our company. SB&G entered into a lease with Boomerang Utah dated October 1, 2008, relating to premises located
at 324 West 2450 North, Building A, Logan, Utah. We assumed this lease in February 2008. The initial term of the lease was for
one year with an annual rent of $260,610 plus real property and school taxes. In addition, Boomerang is obligated to pay for all
utilities, repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used for Boomerang's
manufacturing activities. On March 15, 2010, Boomerang and SB&G agreed to maintain these terms until September 30, 2011. On
October 1, 2011, Boomerang and SB&G agreed to maintain these terms on a month to month basis with the monthly rent remaining
at $21,717, monthly paid rent remaining at $7,000 and monthly accrued rent remaining at $14,717. On July 8, 2010, we converted
$420,769 of deferred rent into 84,154 shares of our common stock and an equal number of five-year warrants, each to purchase one
share of our common stock, at an exercise price of $0.25 per share. Deferred rental payments totaling $267,480, $44,153 and $220,763
have been accrued as of September 30, 2009, 2010, and 2011, respectively, and $132,457 as of June 30, 2012.
Stan Checketts Properties, or SCP, a company
owned by the chief executive officer of Boomerang's wholly owned subsidiary, Boomerang Sub, Inc., entered into a lease with
Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah. We assumed this lease
in February 2008. The initial term of the lease was for one year at a fixed annual rent of $157,680 plus real property and school
taxes. Boomerang 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's manufacturing activities. On March 15, 2010, Boomerang and SCP
agreed to maintain these terms until September 30, 2011. On October 28, 2011, Boomerang and SCP amended the terms of the lease
to provide for a monthly payment of $14,940, effective as of October 1, 2011. On July 8, 2010, we converted $228,950 of deferred
rent into 45,790 shares of our common stock and an equal number of five-year warrants, each to purchase one share of our common
stock, at an exercise price of $5.00. Deferred rental payments totaling $178,808, $26,714 and $133,571 have been accrued as of
September 30, 2009, 2010 and 2011, respectively, and $0 as of June 30, 2012. We are also currently leasing an additional 2,400
square feet of office and conference room space from SCP for $1,800 a month.
SB&G is obligated on a twenty-year promissory
note due August 1, 2027 owing to a non-affiliated bank. The principal amount due was $841,891, $808,687 and $773,913 as of September
30, 2009, 2010 and 2011, respectively, and $745,578 as of June 30, 2012. The note bears interest at 3.807% per annum and is collateralized
by the real property that is the subject of the lease from SB&G to Boomerang Utah. Boomerang and Messrs. Gene Mulvihill, Stan
Checketts, and Burton Koffman, are the joint and several guarantors of this promissory note. Gene Mulvihill is the husband of Gail
Mulvihill and the father of Christopher Mulvihill, our President.
Messrs. Gene 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.
57
J and A Financing, Inc., or J and A, also
affiliated with Messrs. Gene Mulvihill and Koffman, guaranteed two loans to Boomerang Utah from a non-affiliated bank, totaling
$500,728 as of June 30, 2010. The loans bore interest at 3.341% and 3.5% respectively, and were initially due on May 14, 2010 and
May 16, 2010, respectively. These loans were renewed during the quarter ended June 30, 2010 and were then due on May 14, 2011 and
May 16, 2011, respectively. In July 2010, J and A used collateral to purchase these loans from the non-affiliated bank. The outstanding
debt owed to J and A was converted to common stock on July 8, 2010. During fiscal year 2008, J and A loaned $1,000,000 to us. This
loan was scheduled to mature on March 31, 2011. The interest rate was 9% and the principal amount due at June 30, 2010 was $1,000,000.
This loan was converted to Common Stock on July 8, 2010. In total, $1,678,304 of debt owed to J and A was converted into 335,661
shares of common stock, and five-year warrants to purchase 335,661 shares of our common stock at an exercise price of $5.00 per
share.
During the fiscal year ended September 30,
2009, 2010 and 2011, we used the services of Coordinate Services, Inc. for product development. The owner of this company is Gene
Mulvihill, Jr. who is the brother of Christopher Mulvihill, our President, and the son of Gail Mulvihill. The amount of this expense
during the fiscal year ended September 30, 2009, 2010 and 2011was $31,927, $128,959 and $158,879, respectively and $116,103 for
the nine months ended June 30, 2012.
During the fiscal year ended September 30,
2010 and 2011, the Company reimbursed North Jersey Management Services, Inc. for payroll related expenses for the services of Joseph
Bellantoni, the Company's former Chief Financial Officer, and Maureen Cowell, the Company's Corporate Secretary. Mr.
Bellantoni is also the President and Mrs. Cowell is the Vice President of North Jersey Management Services, Inc. Gail Mulvihill
owns 50% of North Jersey Management Services, Inc. The amount of this expense during the fiscal year ended September 30, 2010 and
2011 was $49,500 and $78,000, respectively, and $58,500 for the nine months ended June 30, 2012.
On February 5, 2010, we issued a 6% Convertible
Promissory Note to James Mulvihill, brother of Christopher Mulvihill, our President and director, and the son of Gail Mulvihill,
in the amount of $100,000 due February 5, 2011. In March 2010, the principal and accrued interest on this note was converted into
50,384 shares of common stock.
In April 2010, Gail Mulvihill loaned $130,000
to us bearing interest of 6%. This loan was repaid in full during the year ended September 30, 2010.
In April 2010, we entered into a twenty-year ground lease with
Route 94 Development Corporation, or Route 94, to lease a portion of an approximately fifteen acre parcel in the town of Hamburg,
located in Hardyston Township, New Jersey, on which we constructed a RoboticValet™ parking facility.  The leased property
is adjacent to Grand Cascades Lodge, or Cascades, a hotel within the Crystal Springs Golf and Spa Resort, or the Resort. The parking
facility was constructed by Crystal Springs Builders, LLC, or Builders.   It is intended that this facility will be used
by us primarily for demonstration and marketing purposes in the eastern portion of the United States.  In consideration of
the benefits to us under the terms of the lease, we agree to provide to the lessor and its affiliates parking and storage space
within the facility at no cost to the lessor and its affiliates subject to our right to use the facility for demonstration purposes. 
In addition, we are required to pay the operating costs, premiums on the insurance required under the terms of the lease and incremental
property taxes resulting from our construction of the facility.  For a period of 60 months, commencing five years after execution
of the lease, the lessor has the option to purchase the facility from us and we have a right to cause the lessor to buy from us
the facility we construct.  The price to be paid by the lessor upon exercise of its option to purchase the facility is 110%
of the greater of (i) the depreciated value of the facility, or (ii) the fair market value of the facility, and the price to be
paid by the lessor upon exercise of our right to cause the lessor to buy the facility is $1.00.
58
The Resort owns and operates seven golf
courses, two hotels and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more than 40 additional
entities, including the above named entities. Gail Mulvihill owns 50% of each of Builders, Cascades and Route 94 and, indirectly,
through these and various other entities, Gail Mulvihill and her family own approximately 50% of the Resort. Except as set forth
above, no other officer, director or 5% or greater stockholder of the Company has any equity interest in Builders, Cascades or
Route 94.  The Company incurred expenses of approximately $0, $1,075,000 and $375,000 for Builders during the fiscal
years ended 2009, 2010 and 2011, respectively, and $0 for the nine months ended June 30, 2012. The Company incurred expenses of
approximately $2,200, $14,000 and $80,000 for Cascades during the fiscal years ended 2009, 2010 and 2011, respectively, and $47,000
for the nine months ended June 30, 2012. No expenses were incurred for Route 94 during the fiscal years ended 2009, 2010 and 2011,
or the nine months ended June 30, 2012.
On May 14, 2010, we entered into a 6% convertible
line of credit for up to $1,300,000 with Sail Energy, a company owned by Gail Mulvihill. In May 2011, it was agreed between the
Company and Sail Energy that there would be no additional borrowings under this line of credit. The amount outstanding on this
line of credit as of September 30, 2010 and 2011 was $273,000 and $300,142, respectively. The note, together with accrued but unpaid
interest, was convertible into shares of our common stock. The five-year warrants to purchase our common stock have an exercise
price of $5.00 at a conversion rate of $5.00 for a unit consisting of one share of our common stock and one warrant. This debt
was refinanced as described below.
In July 2010, Venturetek, LP, a principal
stockholder of us, entered into a 6% convertible promissory note with us for $273,000. The amount outstanding on this note, including
accrued interest, as of September 30, 2010 and 2011 was 273,000 and 292,461. The note, together with accrued but unpaid interest,
was convertible into shares of our common stock. The five-year warrants to purchase our common stock have an exercise price of
$5.00 at a conversion rate of $5.00 for a unit consisting of one share of our common stock and one warrant. This debt was refinanced
as described below.
On December 29, 2010, we entered into a
financing commitment letter, which we refer to as the Commitment Letter, pursuant to which it obtained a commitment for an aggregate
of up to $3,250,000 of financing to be provided, upon demand by us, by nine accredited investors, including an aggregate of up
to $1,750,000 by four related parties. If we draw down under the Commitment Letter, we will issue notes to the lenders. Each note
would be our senior unsecured obligation and would bear interest from the date of the borrowing thereunder on the outstanding principal
balance at a rate of 3% per annum. The Commitment Letter expires on the earlier to occur of (a) January 1, 2012, and (b) the consummation
of a private or public offering of our common stock yielding gross proceeds to us in an amount not less than $5,000,000.
Under the terms of the Commitment Letter,
each lender received one five-year warrant for every dollar such lender committed, with an exercise price of $0.30 per share. In
addition, if we borrow under the letter, each lender will receive additional warrants at a rate of three warrants for each dollar
drawn down from that lender's commitment, with the amount of the draw down attributable to each lender's commitment
to be determined on a pro rata basis.
The related parties who committed to provide
financing under the letter are Mark Patterson, our chief executive officer (up to $500,000); Lake Isle Corp., a greater than 10%
holder of our common stock, over which Gail Mulvihill, the mother of our president, Christopher Mulvihill, exercises sole voting
and investment control (up to $750,000); HSK Funding, over which Burton I. Koffman, a greater than 10% holder of our common stock,
exercises sole voting and investment control (up to $250,000); and James Mulvihill, the son of Gail Mulvihill and brother of Christopher
Mulvihill (up to $250,000).
59
In February and March 2011, we drew down
a total of $2,166,664 on our line of credit of $3,250,000. In connection with the draw down, we issued notes in an aggregate amount
of $1,166,666 to four of the related parties listed in the paragraph above. In addition, in connection with the draw down, five-year
warrants were issued to these related parties to purchase a total of 175,000 shares of common stock at an exercise price of $6.00
per share. In May 2011, we drew down the remaining $1,083,336 on the aforementioned line of credit of $3,250,000. In connection
with the draw down, we issued notes in an aggregate amount of $583,334 to four related parties. In addition, in connection with
the draw down, five-year warrants were issued to these related parties to purchase a total of 87,500 shares of common stock at
an exercise price of $6.00 per share. This debt was refinanced as described below.
In September and October 2011, we borrowed
funds from Atlantic and Madison of NJ Corp, a company owned by Gail Mulvihill, in the aggregate principal amount of $1,451,000,
with the understanding that upon finalization of the documents related to a private placement offering by us, these loans will
be considered an investment in such private placement.
In November 2011, we borrowed funds from
Mark Patterson, our Chief Executive Officer, in the amount of $100,000, with the understanding that upon finalization of the documents
related to a private placement offering by us, this loan will be considered an investment in such private placement.
In November and December 2011, we issued
to subscribers 6% convertible promissory notes in the aggregate principal amount of approximately $11.6 million and five-year warrants
to purchase common stock in a private placement. In connection with the offering, we received cash proceeds of approximately $5.0
million and refinanced approximately $6.6 million of then existing short-term indebtedness. For each $100,000 invested, a subscriber
was issued a $100,000 principal amount note and warrants to purchase 23,530 shares of our common stock.
In connection with the 2011 offering, the
following related parties refinanced indebtedness in the amounts and for the notes and warrants listed below.
Name
Indebtedness
Converted
Notes issued in
Offering
Warrants issued in
Offering
HSK Funding Inc.
(1)
$
254,000
$
254,000
59,765
Lake Isle Corporation
(2)
$
1,761,917
(10)
$
1,761,917
414,570
Christopher Mulvihill
(3)
$
1,451,000
(11)
$
1,451,000
341,412
James Mulvihill TTEE Sunset Group Inc. PSP
(4)
$
253,917
$
253,917
59,745
MRP Holdings LLC and Mark R Patterson Revocable Trust
(5)
$
608,014
$
608,014
143,063
Sail Energy LLC
(6)
$
300,142
$
300,142
70,622
Stan Checketts Properties, L.C.
(7)
$
133,571
$
133,571
31,429
SB&G Properties LLC
(8)
$
220,763
$
220,763
51,945
Venturetek L.P.
(9)
$
292,461
$
292,461
68,815
(1)
HSK Funding Inc. is a principal stockholder and a member of SB&G Properties LLC.
(2)
Gail Mulvihill, the individual who exercises sole voting and investment control over Lake Isle Corporation, is the mother of
Christopher Mulvihill, the Company's President, and is a principal stockholder. Lake Isle Corporation is a member of SB&G
Properties LLC.
(3)
Christopher Mulvihill is the Company's President and director.
60
(4)
James Mulvihill is the brother of Christopher Mulvihill and son of Gail Mulvihill.
(5)
MRP Holdings LLC, and Mark R Patterson Revocable Trust are owned by Mark Patterson, the Company's Chief Executive Officer
and director.
(6)
Sail Energy LLC is owned by Gail Mulvihill.
(7)
Stan Checketts Properties, L.C. is owned by Stan Checketts, the Chief Executive Officer of the Company's wholly owned
subsidiary and director of the Company, and is a principal stockholder. Stan Checketts Properties is a member of SB&G Properties
LLC.
(8)
SB&G Properties LLC is owned by HSK Funding Inc., Stan Checketts Properties, Lake Isle Corporation and Venturetek L.P.
(9)
Venturetek L.P. is a principal stockholder and a member of SB&G Properties LLC.
(10)
Included in this balance is $1,000,000 of indebtedness resulting from a bank line of credit that Lake Isle Corp. caused to
be paid in full. Accordingly, the Company became indebted to Lake Isle Corp for $1,000,000.
(11)
On October 28, 2011, Atlantic and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt
owed to it by the Company to Christopher Mulvihill.
The following related parties participated
in the 2012 offering.
Name
Notes issued in
Offering
Warrants issued in
Offering
MRP Holdings LLC (1)
$
150,000
30,000
Sail Energy, LLC (2)
$
510,000
102,000
Heather Mulvihill (3)
$
100,000
20,000
IA 545 Madison Assoc.(4)
$
250,000
50,000
Burton I. Koffman (4)
$
50,000
10,000
David Kent and Christine W. Koch (5)
$
75,000
15,000
(1)
Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company's Chief Executive Officer and a director.
(2)
Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company's
President and director.
(3)
Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.
(4)
Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.
(5)
David Kent Koch is the Company's Chief Operating Officer.
On May 16, 2012, we entered into a line
of credit for an amount up to $400,000 with Highlands State Bank which is guaranteed by through amounts in a checking account with
Princeton London Investment Fund Corp. funded by Mark R. Patterson, a principal stockholder and the Company's Chief Executive
Officer and director, Gene Mulvihill and Christopher Mulvihill each of whom funded $100,000 as of May 16, 2012. This line of credit
was repaid with proceeds from the 2012 offering.
During the quarter ended June 30, 2012,
the Resort paid $50,000 to the Company for the purchase of mechanical parking equipment that will be provided by Boomerang-Stokes
Mechanical Parking LLC. At June 30, 2012, the Company recorded this amount as a payable and has subsequently paid the amount in
full to Boomerang-Stokes Mechanical Parking LLC.
Our management believes that the terms of
the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under
the circumstances as when the transactions were entered into.
61
Review, approval or ratification
of transactions with related persons
Our management believes that the terms of
the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under
the circumstances as when the transactions were entered into.
62
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September
13, 2012, 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 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 September 13, 2012, we had 7,399,086 shares of Common Stock outstanding.
Some of the beneficial owners listed below
are also selling securityholders. See "Selling Securityholders."
Unless otherwise indicated, the address
for each beneficial holder of 5% or more of our common stock is c/o Boomerang Systems, Inc., 30B Vreeland Road, Florham Park, New
Jersey 07932.
Name of Beneficial Owner
Number of Shares
Beneficially Owned
(1)
Percentage of
Common Stock
Outstanding
(1)
Mark R. Patterson
2,251,862 (2)
24.1
%
Christopher Mulvihill
1,241,464 (3)
15.0
%
Stanley J. Checketts
1,013,305 (4)
12.8
%
Scott Shepherd
-
-
David Koch
41,807 (5)
*
Joseph R. Bellantoni
37,667 (6)
*
Maureen Cowell
27,534 (7)
*
Anthony P. Miele, III
93,527 (8)
1.3
%
Steven Rockefeller, Jr.
60,000 (9)
*
Kevin Cassidy
-
-
All Directors and Executive Officers as a Group (10 persons)
4,767,166
43.5
%
Other 5% Stockholders
Gail Mulvihill
3,383,739 (10)
36.5
%
Lake Isle Corp.
2,135,754 (11)
24.0
%
Burton I. Koffman
1,926,698 (12)
23.1
%
Venturetek, LP
1,714,791 (13)
21.0
%
HSK Funding, Inc.
1,602,015 (14)
19.5
%
Stan Checketts Properties, LLC
763,305 (15)
9.9
%
Albert Behler
763,821 (16)
9.6
%
J and A Financing Inc
671,322 (17)
8.7
%
Sail Energy LLC
671,322 (18)
6.1
%
MRP Holdings LLC
403,927 (19)
5.2
%
Alexandria Equities, LLC
400,557 (20)
5.1
%
* 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 September 13, 2012 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.
63
(2)
Includes 190,000 shares held by Mr. Patterson, 1,410,000 shares issuable upon exercise of warrants held by Mr. Patterson, 4,861
shares held by MRP Holdings LLC, over which Mr. Patterson exercises sole voting and investment control, referred to as MRP, 149,533
shares issuable upon the conversion of outstanding convertible notes held by MRP, 249,533 shares issuable upon the exercise of
warrants held by MRP, 100,875 shares held by Mark R. Patterson Revocable Trust, over which Mr. Patterson exercises sole voting
and investment control, referred to as Patterson Trust, 23,530 shares issuable upon the conversion of outstanding convertible notes
held by Patterson Trust and 123,530 shares issuable upon the exercise of warrants held by Patterson Trust. All warrants and notes
are exercisable or convertible within 60 days of September 13, 2012.
(3)
Includes 338,640 shares owned directly by Mr. Mulvihill and 20,000 shares owned by Great Delaware & American, Inc. over
which Mr. Mulvihill exercises sole voting and investment control. Also includes 341,412 shares issuable upon the conversion of
outstanding convertible notes held by Mr. Mulvihill, 200,000 shares issuable on exercise of options and 341,412 shares issuable
on exercise of warrants, all of which are exercisable within 60 days of September 13, 2012.
(4)
Includes 250,000 shares issuable upon exercise of options issued to Mr. Checketts, 380,382 shares held by Stan Checketts Properties,
LLC, over which Mr. Checketts exercises sole voting and investment control, referred to as SCP, 31,429 shares issuable upon the
conversion of outstanding convertible notes held by SCP, 77,219 shares issuable upon the exercise of warrants held by SCP, 86,231
shares held by SB&G Properties L.L.C., referred to as SB&G, which is owned, in part, by SCP, 51,945 shares issuable upon
the conversion of outstanding convertible notes held by SB&G, and 136,099 shares issuable upon the exercise of warrants held
by SB&G. All of the options, notes and warrants are exercisable or convertible within 60 days of September 13, 2012.
(5)
Includes 11,765 shares held by Mr. Koch directly and 42 shares held directly by Mr. Koch and his wife, 15,000 shares issuable
upon the conversion of outstanding convertible notes held by Mr. Koch and his wife and 15,000 shares issuable upon exercise of
outstanding warrants held by Mr. Koch and his wife.
(6)
Includes 167 shares held by Mr. Bellantoni's father as to which Mr. Bellantoni disclaims beneficial ownership. Also includes
37,500 shares issuable on exercise of options exercisable within 60 days of September 13, 2012.
(7)
Includes 27,534 shares issuable on exercise of options exercisable within 60 days of September 13, 2012.
(8)
Includes 73,750 shares owned directly by Mr. Miele and Heather Miele and 19,777 shares issuable upon exercise of warrants received
from the August 2008 Post-Maturity warrants held by Mr. Miele and Heather Miele exercisable within 60 days of September 13, 2012.
(9)
This includes 60,000 shares issuable on exercise of warrants exercisable within 60 days of September 13, 2012.
(10)
Includes 760,034 shares held by Mrs. Mulvihill, 15,400 shares issuable upon the exercise of warrants held by Mrs. Mulvihill,
127,307 shares held by Sail Energy LLC, over which Mrs. Mulvihill exercises sole voting and investment control, referred to as
Sail Energy, 172,622 shares issuable upon the conversion of outstanding convertible notes held by Sail Energy, 172,622 shares issuable
upon the exercise of warrants held by Sail Energy, 211,017 shares held by Lake Isle Corp., over which Mrs. Mulvihill exercises
sole voting and investment control, referred to as Lake Isle, 564,570 shares issuable upon the exercise of warrants held by Lake
Isle, 414,570 shares issuable upon the conversion of outstanding convertible notes held by Lake Isle, 86,231 shares held by SB&G,
which is owned, in part, by Lake Isle, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&G,
136,099 shares issuable upon the exercise of warrants held by SB&G, 335,661 shares held by J and A Financing Inc., referred
to as J&A, which is owned, in part, by Lake Isle, and 335,661 shares issuable upon the exercise of warrants held by J&A,
all of which are exercisable or convertible within 60 days of September 13, 2012. The address for J&A, Sail Energy and Lake
Isle is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.
64
(11)
Includes 211,017 shares held by Lake Isle, over which Gail Mulvihill exercises sole voting and investment control, 564,570
shares issuable upon the exercise of warrants held by Lake Isle, 414,570 shares issuable upon the conversion of outstanding convertible
notes held by Lake Isle, 86,231 shares held by SB&G, which is owned, in part, by Lake Isle, 51,945 shares issuable upon the
conversion of outstanding convertible notes held by SB&G, 136,099 shares issuable upon the exercise of warrants held by SB&G,
335,661 shares held by J&A, which is owned, in part, by Lake Isle, and 335,661 shares issuable upon the exercise of warrants
held by J&A, all of which are exercisable or convertible within 60 days of September 13, 2012. The address for Lake Isle is
3621 Route 94, 2nd Floor, Hamburg, NJ 07419.
(12)
This information is based in part on a Schedule 13G filed with the Securities and Exchange Commission on November 13, 2009.
Includes 5,803 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible notes
held by Mr. Koffman and 12,500 shares issuable upon exercise of warrants held by Mr. Koffman, 4,592 shares owned by Public Loan
Company, 4,176 shares owned by The K-6 Family Limited Partnership, 20,000 shares owned by 300 Plaza Drive Associates, 25,000 shares
owned by New Valu, Inc., 137,612 shares owned by IA 545 Madison Assoc., 55,000 shares issuable upon exercise of warrants held by
IA 545 Madison Assoc. and 50,000 shares issuable upon conversion of outstanding convertible notes held by IA 545 Madison Assoc.,
376,359 shares owned by HSK Funding Inc., referred to as HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765
shares issuable upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&G, which is owned,
in part, by HSK, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&G, 136,099 shares issuable
upon the exercise of warrants held by SB&G, 335,661 shares held by J&A, which is owned, in part, by HSK, and 335,661 shares
issuable upon the exercise of warrants held by J&A, exercisable within 60 days of September 13, 2012, over which Mr. Koffman
exercises voting and investment control of all securities held by these entities. The address for Mr. Koffman is 300 Plaza Drive,
Vestal, NY 13850.
(13)
David Selengut is the natural person who exercises voting and investment control over the shares held by Venturetek, LP. Includes
512,214 shares owned directly by Venturetek, LP., 188,165 shares issuable upon exercise of warrants held by Venturetek, and 68,815
shares issuable upon the conversion of outstanding convertible notes held by Venturetek, 86,231 shares held by SB&G, which
is owned, in part, by Venturetek, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&G,
136,099 shares issuable upon the exercise of warrants held by SB&G, 335,661 shares held by J&A, which is owned, in part,
by Venturetek, and 335,661 shares issuable upon the exercise of warrants held by J&A, all of which are exercisable or convertible
within 60 days of September 13, 2012. The address for Venturetek is c/o Nesher LLC, P.O. Box 339, Lawrence, NY 11559.
(14)
Includes 376,359 shares held by HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765 shares issuable
upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&G, which is owned, in part, by HSK,
51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&G, 136,099 shares issuable upon the
exercise of warrants held by SB&G, 335,661 shares held by J&A, which is owned, in part, by HSK, and 335,661 shares issuable
upon the exercise of warrants held by J&A, all of which are exercisable or convertible within 60 days of September 13, 2012.
The address for HSK is 300 Plaza Drive, Vestal, NY 13850.
(15)
Includes 380,382 shares held by SCP, over which Mr. Checketts exercises sole voting and investment control, 31,429 shares issuable
upon the conversion of outstanding convertible notes held by SCP, 77,219 shares issuable upon the exercise of warrants held by
SCP, 86,231 shares held by SB&G, which is owned, in part, by SCP, 51,945 shares issuable upon the conversion of outstanding
convertible notes held by SB&G, and 136,099 shares issuable upon the exercise of warrants held by SB&G. All of the warrants
and notes are exercisable or convertible within 60 days of September 13, 2012. The address for SCP is P.O. Box 55, Providence,
UT 84332.
65
(16)
Includes 214,775 shares owned directly by Mr. Behler, and 429,523 shares issuable upon exercise of warrants, and 119,523 shares
issuable upon the conversion of outstanding convertible notes exercisable within 60 days of September 13, 2012.
(17)
Includes 335,661 shares held directly by J&A and 335,661 shares issuable upon exercise of warrants exercisable within 60
days of September 13, 2012. The address for J&A is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.
(18)
Includes 127,307 shares held directly by Sail Energy, 172,622 shares issuable upon exercise of warrants and 172,622 issuable
upon conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012. The address for Sail Energy
is 3621 Route 94, 2nd Floor, Hamburg, NJ 07419.
(19)
Includes 4,861 shares held directly by MRP, 249,533 shares issuable upon exercise of warrants and 149,533 shares issuable upon
conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012.
(20)
Includes 557 shares held directly by Alexandria Equities, LLC, 200,000 shares issuable upon exercise of warrants and 200,000
shares issuable upon conversion of outstanding convertible notes, all exercisable within 60 days of September 13, 2012.
66
SELLING SECURITYHOLDERS
The shares of common stock being offered
by the selling securityholders are those issuable to the selling securityholders upon conversion of the notes and exercise of the
warrants. For additional information regarding the issuance of the notes and the warrants, see "Private Placement of Notes
and Warrants" above. We are registering the shares of common stock in order to permit the selling securityholders to offer
the shares for resale from time to time. Other than as described below, except for the ownership of the notes and the warrants
issued pursuant to the Subscription Agreement, the selling securityholders have not had any material relationship with us within
the past three years.
The table below lists the selling securityholders
and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder) of the shares of common stock held by each of the selling securityholders.
The third column lists the number of shares of common stock beneficially owned by the selling securityholders, based on their respective
ownership of shares of common stock, notes and warrants, as of September 13, 2012, assuming conversion of the notes and exercise
of the warrants held by each such selling securityholder on that date but taking account of any limitations on conversion and exercise
set forth therein.
The fourth column lists the shares of common
stock being offered by this prospectus by the selling securityholders and does not take into account any limitations on (i) conversion
of the notes set forth therein or (ii) exercise of the warrants set forth therein.
In accordance with the terms of a registration
rights agreement with the holders of the notes and the warrants, this prospectus generally covers the resale of 120% of the sum
of (i) the maximum number of shares of common stock issuable upon conversion of the notes and (ii) the maximum number of shares
of common stock issuable upon exercise of the warrants, in each case, determined as if the outstanding notes and warrants were
converted or exercised (as the case may be) in full (without regard to any limitations on conversion or exercise contained therein)
as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. Because the
conversion price of the notes and the exercise price of the warrants may be adjusted or stock issued upon certain events, the number
of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus.
In June 2012, we issued an aggregate amount
of 2,795 shares to the holders of the notes as interest payments on such notes, which amounts are included in the fourth and fifth
columns.
The fifth column assumes the sale of all
of the shares offered by the selling securityholders pursuant to this prospectus.
Under
the terms of the notes and the warrants, a selling securityholder may not convert the notes or exercise the warrants to the extent
(but only to the extent) such selling securityholder or any of its affiliates would beneficially own a number of shares of our
common stock which would exceed 4.9%. The number of shares in the second column reflects these limitations. The selling securityholders
may sell all, some or none of their shares in this offering. See "Plan of Distribution."
67
Name of Selling
Securityholder
Principal Amount
of Notes Offered
pursuant to this
Prospectus
Warrants Offered
Pursuant to this
Prospectus
Shares of
Common Stock
Beneficially
Owned Prior to
Offering
Maximum
Number of Shares
of Common Stock
Being Offered
Pursuant to this
Prospectus
Shares of Common
Stock Beneficially
Owned After
Offering
Number
%
Number
%
Alexandria Equities, LLC(1)
$
1,000,000
200,000
400,557
5.1
480,000
—
—
Bancroft Investments(2)
$
250,000
50,000
100,140
1.3
120,000
—
—
Michael and Sarah Berman(3)
$
100,000
20,000
40,056
*
48,000
—
—
Bri Ram Cor, LLC(4)
$
100,000
20,000
40,056
*
48,000
—
—
Celestial Holdings, LLC(5)
$
100,000
20,000
40,000
*
48,000
—
—
Churchill  Drive Investors, LLC(6)
$
100,000
20,000
351,940
4.5
48,000
311,884
4.2
Michael Dana(7)
$
50,000
10,000
60,028
*
24,000
40,000
*
Martha T. Douds Revocable Trust DTD 09/25/1989(8)
$
75,000
15,000
30,000
*
36,000
—
—
Eagle Hawk Partners, LP(9)
$
100,000
20,000
159,998
2.1
48,000
119,998
1.6
Paul and Elizabeth Faherty(10)
$
40,000
8,000
16,023
*
19,200
—
—
James Gelly(11)
$
150,000
30,000
108,084
1.4
72,000
48,000
*
Gilford Securities Incorporated(12)
–
54,800
163,976
2.2
65,760
109,176
1.5
William J. Goodrum Revocable Trust(13)
$
100,000
20,000
40,000
*
48,000
—
—
John W. Gosnell(14)
$
100,000
20,000
40,056
*
48,000
—
—
Charles A. Gravely(15)
$
200,000
40,000
80,112
1.1
96,000
—
—
Steven Harrigan(16)
$
50,000
10,000
20,000
*
24,000
—
—
IA 545 Madison Assoc.(17)
$
250,000
50,000
242,612
3.2
120,000
142,500
1.9
Robert Insolia(18)
$
50,000
10,000
20,028
*
24,000
—
—
JMW Fund, LLC(19)
$
100,000
20,000
40,056
*
48,000
—
—
James D. Klein(20)
$
150,000
30,000
60,000
*
72,000
—
—
Burton I. Koffman(21)
$
50,000
10,000
1,926,698
22.6
24,000
1,806,586
21.2
Milton Koffman(22)
$
50,000
10,000
325,082
4.3
24,000
204,970
2.7
David Kent and Christine W. Koch(23)
$
75,000
15,000
41,087
*
36,000
11,765
*
McClane Cover(24)
$
100,000
20,000
40,056
*
48,000
—
—
Gilbert G. Menna(25)
$
150,000
30,000
60,084
*
72,000
—
—
Mitchell Family Investments II, LLC(26)
$
100,000
20,000
40,000
*
48,000
—
—
MRP Holdings LLC(27)
$
150,000
30,000
403,927
5.2
72,000
343,843
4.4
Heather Mulvihill(28)
$
100,000
20,000
425,718
5.5
48,000
385,662
5.2
Albert Nocciolino(29)
$
25,000
5,000
54,883
*
12,000
44,883
*
Katherine Obrien(30)
$
75,000
15,000
30,000
*
36,000
—
—
Wendy S. O'Keeffe(31)
$
50,000
10,000
20,028
*
24,000
—
—
Robert O'Mara IRA(32)
$
200,000
40,000
88,862
1.2
96,000
18,867
*
68
Name of Selling
Securityholder
Principal Amount
of Notes Offered
pursuant to this
Prospectus
Warrants Offered
Pursuant to this
Prospectus
Shares of
Common Stock
Beneficially
Owned Prior to
Offering
Maximum
Number of Shares
of Common Stock
Being Offered
Pursuant to this
Prospectus
Shares of Common
Stock Beneficially
Owned After
Offering
Number
%
Number
%
Pacific Asset Partners(33)
$
600,000
120,000
240,279
3.1
288,000
—
—
Stephen L. and Catherine J. Parker(34)
$
100,000
20,000
40,056
*
48,000
—
—
Dennis Pigat(35)
$
50,000
10,000
20,028
*
24,000
—
—
Louis C. Rose(36)
$
125,000
25,000
194,068
2.6
60,000
143,998
1.9
Philip Rubinfeld(37)
$
125,000
25,000
145,998
1.9
60,000
95,998
1.3
Sail Energy LLC(38)
$
510,000
102,000
472,551
6.1
244,800
268,267
3.5
San Gabriel Fund, LLC(39)
$
100,000
20,000
40,056
*
48,000
—
—
Ettore A. Santucci(40)
$
100,000
20,000
40,056
*
48,000
—
—
VN Advisors, LLC(41)
$
50,000
10,000
44,000
*
24,000
24,000
*
Vulcan Properties, Inc.(42)
$
50,000
10,000
83,029
1.1
24,000
63,001
*
Shelton Zuckerman(43)
$
200,000
40,000
80,112
1.1
96,000
—
—
*Denotes less than 1%.
(1)
Includes 557 shares held directly, 200,000 shares issuable upon conversion of notes and 200,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Joel Marcus, as chief executive officer of the managing member, Alexandria
Real Estate Equities, Inc., has sole voting and dispositive power over the securities held by Alexandria Equities, LLC.
(2)
Includes 140 shares held directly, 50,000 shares issuable upon conversion of notes and 50,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Paul M. Bancroft, as managing partner, has voting and dispositive
power over the securities held by Bancroft Investments.
(3)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
(4)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants. The selling securityholder also informed us that Brian Bates, as managing partner, has sole voting and dispositive
power over the securities held by BriRamCor, LLC.
(5)
Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that Karen B. Cohen, as the sole member and sole manager, has sole voting and dispositive power
over the securities held by Vulcan Properties, Inc.
(6)
Includes 72,444 shares held directly, 79,748 shares issuable upon conversion of notes and 199,748 shares issuable upon exercise
of warrants. The selling securityholder also informed us that John Blumberg, as sole member, has sole voting and dispositive power
over the securities held by Churchill Drive Investors LLC.
(7)
Includes 20,028 shares held directly, 10,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise
of warrants.
(8)
Includes 15,000 shares issuable upon conversion of notes and 15,000 shares issuable upon exercise of warrants. The selling
securityholder also informed us that Martha T. Douds, as trustee, has sole voting and dispositive power over the securities held
by the Martha T. Douds Revocable Trust dated 9/25/1989.
69
(9)
Includes 2,350 shares held directly, 78,824 shares issuable upon conversion of the note and 78,824 shares issuable upon exercise
of warrants. The selling securityholder has informed us that David P. O'Connor, as managing partner, has sole voting and
dispositive power over the shares held by Eagle Hawk Partners, LP.
(10)
Includes 23 shares held directly, 8,000 shares issuable upon conversion of notes and 8,000 shares issuable upon exercise of
warrants.
(11)
Includes 1,024 shares held directly, 53,530 shares issuable upon conversion of notes and 53,530 shares issuable upon exercise
of warrants.
(12)
All shares are issuable upon exercise of warrants issued to Gilford Securities Incorporated as compensation for services as
placement agent. The selling securityholder has informed us that Robert A. Maley, as President and Chief Executive Officer of Gilford
Securities Incorporated, has sole voting and dispositive power over the securities held by Gilford Securities Incorporated. Gilford
Securities Incorporated is a registered broker-dealer.
(13)
Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that William J. Goodrum, as trustee, has sole voting and dispositive power over the securities held
by the William J. Goodrum Revocable Trust.
(14)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
(15)
Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.
(16)
Includes 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise of warrants.
(17)
Includes 137,612 shares held directly, 50,000 shares issuable upon conversion of notes and 55,000 issuable upon exercise of
warrants. The selling securityholder has informed us that Burton I. Koffman and Milton Koffman are partners of IA 545 Madison Assoc.
and each has voting and dispositive power over the securities held by IA 545 Madison Assoc.
(18)
Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.
(19)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
The selling securityholder has informed us that Justin Yorke,
as managing member, has sole voting and dispositive power over the securities held by JMW Fund, LLC.
(20)
Includes 30,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that James D. Klein, has sole voting and dispositive power over the securities held by the James
D. Klein IRA.
(21)
Includes 5,803 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible
notes held by Mr. Koffman and 12,500 shares issuable upon exercise of warrants held by Mr. Koffman, 4,592 shares owned by Public
Loan Company, 4,176 shares owned by The K-6 Family Limited Partnership, 20,000 shares owned by 300 Plaza Drive Associates, 25,000
shares owned by New Valu, Inc., 137,612 shares owned by IA 545 Madison Assoc., 50,000 shares issuable upon conversion of outstanding
convertible notes held by IA 545 Madison Assoc., 55,000 shares issuable upon exercise of warrants held by IA 545 Madison Assoc.
376,359 shares owned by HSK Funding Inc., referred to as HSK, 220,294 shares issuable upon exercise of warrants held by HSK, 59,765
shares issuable upon the conversion of outstanding convertible notes held by HSK, 86,231 shares held by SB&G, which is owned,
in part, by HSK, 51,945 shares issuable upon the conversion of outstanding convertible notes held by SB&G, 136,099 shares issuable
upon the exercise of warrants held by SB&G, 335,661 shares held by J&A, which is owned, in part, by HSK, and 335,661 shares
issuable upon the exercise of warrants held by J&A, Mr. Koffman exercises voting and dispositive power over all securities
held by these entities.
70
(22)
Includes 57,470 shares owned directly by Mr. Koffman, 10,000 shares issuable upon the conversion of outstanding convertible
notes held by Mr. Koffman, 15,000 shares issuable upon the exercise of warrants held by Mr. Koffman, 137,612 shares owned by IA
545 Madison Assoc., 50,000 shares issuable upon conversion of outstanding convertible notes held by IA 545 Madison Assoc., and
55,000 shares issuable upon the exercise of warrants held by IA 545 Madison Assoc.
(23)
Includes 11,675 shares held directly by Mr. Koch and 42 shares held directly by Mr. Koch and his wife, 15,000 shares issuable
upon the conversion of outstanding convertible notes held by Mr. Koch and his wife and 15,000 shares issuable upon exercise of
outstanding warrants held by Mr. Koch and his wife.
(24)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
(25)
Includes 84 shares held directly, 30,000 shares issuable upon conversion of notes and 30,000 shares issuable upon exercise
of warrants.
(26)
Includes 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise of warrants. The selling
securityholder has informed us that Charles F. Mitchell, as manager, has sole voting and dispositive power over the securities
held by Mitchell Family Investments II, LLC.
(27)
Includes 4,861 shares held directly, 149,533 shares issuable upon conversion of notes and 249,533 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Mark R. Patterson, as member, has sole voting and dispositive power
over the securities held by the MRP Holdings LLC. Mr. Patterson is the Chief Executive Officer and a director of Boomerang. See
also "Certain Relationships and Related Transactions."
(28)
Includes 68,256 shares held directly, 20,000 shares issuable upon conversion of notes and 90,200 shares issuable upon exercise
of warrants. Also includes 50,384 shares held by James Mulvihill, Heather Mulvihill's husband, and 27,388 shares, 59,745
shares issuable upon conversion of notes and 109,745 shares issuable upon exercise of warrants by James Mulvihill's TTEE
PSP and over which Ms. Mulvihill is deemed to have beneficiary ownership.
(29)
Includes 33,889 shares held directly, 5,000 shares issuable upon conversion of notes and 15,994 shares issuable upon exercise
of warrants.
(30)
Includes 15,000 shares issuable upon conversion of notes and 15,000 shares issuable upon exercise of warrants.
(31)
Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.
(32)
Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.
(33)
Includes 279 shares held directly, 120,000 shares issuable upon conversion of notes and 120,000 shares issuable upon exercise
of warrants. Robert M. Stafford, General Partner of Pacific Asset Partners, has voting and dispositive power over the securities
held by Pacific Asset Partners
(34)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
(35)
Includes 28 shares held directly, 10,000 shares issuable upon conversion of notes and 10,000 shares issuable upon exercise
of warrants.
(36)
Includes 2,890 shares held directly, 95,589 shares issuable upon conversion of notes and 95,589 shares issuable upon exercise
of warrants.
(37)
Includes 1,880 shares held directly, 72,059 shares issuable upon conversion of notes and 72,059 shares issuable upon exercise
of warrants.
(38)
Includes 127,307 shares held directly, 172,622 shares issuable upon conversion of notes, 172,622 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Gail Mulvihill, as sole member, has sole voting and dispositive power
over the securities held by Sail Energy LLC. Gail Mulvihill is one of our principal stockholders. See also "Certain Relationships
and Related Transactions."
71
(39)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Justin Yorke, as managing member, has sole voting and dispositive
power over the securities held by San Gabriel Fund, LLC.
(40)
Includes 56 shares held directly, 20,000 shares issuable upon conversion of notes and 20,000 shares issuable upon exercise
of warrants.
(41)
Includes 470 shares held directly, 21,765 shares issuable upon conversion of notes and 21,765 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Victor J. Nesi, managing member, has sole voting and dispositive power
over the securities held by VN Advisors, LLC.
(42)
Includes 53,502 shares held directly, 10,000 shares issuable upon conversion of notes and 19,527 shares issuable upon exercise
of warrants. The selling securityholder has informed us that Karen B. Cohen, as the sole stockholder, has sole voting and dispositive
power over the securities held by Vulcan Properties, Inc.
(43)
Includes 112 shares held directly, 40,000 shares issuable upon conversion of notes and 40,000 shares issuable upon exercise
of warrants.
72
PLAN OF DISTRIBUTION
We are registering the notes, warrants,
shares of common stock issuable upon conversion of the notes and exercise of the warrants to permit the resale of these securities
by the holders of securities from time to time after the date of this prospectus. We will not receive any of the proceeds from
the sale by the selling securityholders of the securities, however, we will receive proceeds from the exercise of the warrants,
to the extent the cashless exercise provision is not utilized. We will bear all fees and expenses incident to our obligation to
register the securities.
The selling securityholders may sell all
or a portion of the securities held by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the securities are sold through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts or commissions or agent's commissions. The public offering price for the warrants
will be $2.26 per warrant. In calculating this price, we used the Black-Scholes option pricing model, which utilizes inputs such
as the closing price of our common stock, exercise price of the warrants, assumed dividend yield, assumed risk-free interest rate,
expected volatility and expected term. The public offering price for the notes will be the principal amount of the note. The public
offering price for the common stock will be $6.00 per share until the shares of common stock are quoted on a national securities
exchange or the OTC Bulletin Board at which time the shares of common stock will be sold at prevailing market prices or at privately
negotiated prices. There can be no assurance our common stock will be quoted on a national securities exchange or the OTC Bulletin
Board.
These sales may be effected in transactions,
which may involve crosses or block transactions, pursuant to one or more of the following methods:
·
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
·
in the over-the-counter market;
·
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
·
through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
short sales made after the date the Registration Statement is declared effective by the SEC;
73
·
broker-dealers may agree with a selling securityholder to sell a specified number of such shares at a stipulated price per
share;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
The selling securityholders may also sell
the securities under Rule 144 promulgated under the Securities Act of 1933, as amended, if available, rather than under this prospectus.
In addition, the selling securityholders may transfer the securities by other means not described in this prospectus. If the selling
securityholders effect such transactions by selling the securities to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling securityholders
or commissions from purchasers of the securities for whom they may act as agent or to whom they may sell as principal (which discounts,
concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the securities or otherwise, the selling securityholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short sales of the securities in the course of hedging in
positions they assume. The selling securityholders may also sell securities short and deliver securities covered by this prospectus
to close out short positions and to return borrowed securities in connection with such short sales. The selling securityholders
may also loan or pledge the securities to broker-dealers that in turn may sell such securities.
The selling securityholders may pledge or
grant a security interest in some or all of the notes, warrants or shares of common stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties may offer and sell the securities from time to time
pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act amending, if necessary, the list of selling securityholders to include the pledgee, transferee or other successors in interest
as selling securityholders under this prospectus. The selling securityholders also may transfer and donate the securities in other
circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
To the extent required by the Securities
Act and the rules and regulations thereunder, the selling securityholders and any broker-dealer participating in the distribution
of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid,
or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the securities is made, a prospectus supplement, if required, will be
distributed, which will set forth the aggregate amount of the securities being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the
selling securityholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
The securities covered by this prospectus
will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition,
in certain states, the securities covered by this prospectus may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
We have not taken any steps to register, or otherwise permit the sale of, the securities covered by this prospectus under any state
laws. Each of the selling securityholders is required to take all necessary steps to meet state law requirements prior to selling
any securities under this prospectus. Potential investors should consider getting representations from the applicable selling securityholder
confirming that such selling securityholder has complied with all applicable state laws in order to confirm that the purchase by
such investor complies with applicable state laws.
74
There can be no assurance that any selling
securityholder will sell any or all of the securities registered pursuant to the registration statement, of which this prospectus
forms a part.
The selling securityholders and any other
person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any of the securities by the selling securityholders and any other participating
person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the securities
to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the
securities and the ability of any person or entity to engage in market-making activities with respect to the securities.
We will pay all expenses of the registration
of the securities pursuant to the registration rights agreement; provided, however, a selling securityholder will pay all underwriting
discounts and selling commissions, if any. We will not receive any proceeds from the sale of the securities, however, we will receive
proceeds from the exercise of the warrants, to the extent the cashless exercise provision is not utilized. We will indemnify the
selling securityholders against liabilities, including some liabilities under the Securities Act in accordance with the registration
rights agreements or the selling securityholders will be entitled to contribution. We may be indemnified by the selling securityholders
against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished
to us by the selling securityholder specifically for use in this prospectus, in accordance with the related registration rights
agreements or we may be entitled to contribution.
DESCRIPTION OF SECURITIES
The following summarizes the material provisions
of the securities offered by the selling securityholders, our capital stock and important provisions of our certificate of incorporation
and bylaws. This summary is not complete and is qualified by our certificate of incorporation, bylaws, form of note and form of
warrant, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part and by the
provisions of applicable law.
As of the date of this prospectus, our authorized
capital stock consists of 400,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of preferred stock,
par value $0.01 per share. As of September 13, 2012, there were 7,399,086 shares of common stock and no shares of preferred stock
will be outstanding. If all of the notes and warrants covered by this prospectus were converted or exercised, then, as of September
13, 2012, there would have been 9,933,886 shares of common stock outstanding. This number assumes no conversion of 2011 Notes,
which are convertible into an aggregate of 2,735,206 shares of common stock, and no exercise of outstanding options and other warrants
that, as of the date of this prospectus are exercisable to purchase an aggregate of 8,071,951 shares of common stock.
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Common Stock
Holders of our common stock are entitled
to one vote per share on all matters to be voted upon by the stockholders, and do not have cumulative voting rights. A plurality
of the votes cast in the election of directors is sufficient to elect nominees to our board of directors. The holders of common
stock are entitled to receive dividends as may be declared by the board of directors, provided that no dividends or other distributions
on our common stock may be paid, nor may any shares of our common stock be purchased, redeemed or otherwise acquired for value
by us if any shares of our Series A Convertible Preferred Stock are outstanding. Upon our liquidation, dissolution or winding up,
and subject to any prior rights of outstanding preferred stock, the holders of our common stock will be entitled to share pro rata
in the distribution of all of our assets available for distribution to our stockholders after satisfaction of all of our liabilities
and the payment of the liquidation preference of any preferred stock that may be outstanding. There are no redemption or sinking
fund provisions applicable to our common stock. All outstanding shares of common stock are fully paid and non-assessable. The holders
of our common stock have no preemptive or other subscription rights to purchase our common stock.
2012 Notes
The 2012 notes are 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.
Interest accrues on the 2012 notes at 6%
per annum. Interest is payable quarterly, commencing on June 30, 2012, with respect to the 2012 notes issued in June 2012, and
September 30, 2012, with respect to the 2012 notes issued in July 2012. At our option, interest may be payable in: (i) cash or
(ii) shares of the Common Stock. If the we elect to pay interest in shares of our common stock on an interest payment date, the
number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable
on such interest payment date by the lesser of: (i) the conversion price, and (ii) the average of the last sale price of the common
stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date, or the average price, if the ADTV of the common stock for the ten (10) trading days prior to the interest payment date is
less than $100,000 per day, provided, however if the ADTV is equal to or greater than $100,000, it will be the average price, and
not the conversion price.
The outstanding principal amount of the
2012 notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined
by dividing the outstanding principal amount of the 2012 notes plus accrued and unpaid interest thereon, by the conversion price
in effect on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common
stock on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the conversion price; (ii) the shares issuable
upon conversion of the 2012 notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated
under the Securities Act of 1933 without restriction as to volume or manner of sale, and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.
If an event of default as defined in the
2012 notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 notes then
outstanding to be due and payable.
For so long as the 2012 notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the 2012 notes, we
may not:
·
create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon our balance sheet as liabilities and which would be senior
or pari passu in right of payment to the 2012 notes, except for: (i) secured or unsecured debt issued to a bank or financial institution
on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;
76
·
permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of our company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to our knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary for services
actually rendered, as approved by our Board of Directors as fair in all respects to us, (ii) reimbursement for expenses incurred
on behalf of us, (iii) transactions and written arrangements in existence on the date of the initial issuance of the 2012 notes,
and any amendments, modifications, cancellations, terminations, limitations and waivers approved by a majority of the independent
disinterested directors of our company; and
·
permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or such subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii)
purchase or otherwise acquire for value, directly or indirectly, any shares or other equity security of our company, other than
the 2012 notes or 2012 warrants.
2012 Warrants
The 2012 warrants are exercisable at $5.00
per share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally,
the exercise price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of our common
stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the common stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the Warrant if
such exercise would result in such holder's total ownership of our common stock exceeding 4.9%. The Warrants expire on June
14, 2017.
2011 Notes
The notes are convertible into common stock
at $4.25 per share, referred to as the Conversion Price, subject to weighted average adjustment for issuances of common stock or
common stock equivalents below the Conversion Price, subject to certain exceptions.
Interest accrues on the notes at 6% per
annum. Interest is payable quarterly, commencing on December 31, 2011, at the Company's option, interest may be payable in:
(i) cash or (ii) shares of the common stock. If the Company elects to pay interest in shares of its common stock on an interest
payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid
interest payable on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale
price of the common stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding
such interest payment date, referred to as the "Average Price, if the average daily trading volume, referred to as the ADTV
of the common stock for the ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however
if the ADTV is equal to or greater than $100,000, it will be the Average Price, and not the Conversion Price.
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The outstanding principal amount of the
notes and accrued and unpaid interest thereon will automatically convert into a number of shares of common stock determined by
dividing the outstanding principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect
on the mandatory conversion date. The mandatory conversion date is the date on which (i) the last sale price of the common stock
on 20 of the 30 immediately preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon
conversion of the notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated under the
Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.
If an event of default as defined in the
notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the note then outstanding
to be, due and payable.
For so long as the notes are outstanding,
without the prior written consent of the holders of at least a majority of the aggregate principal amount of the notes, the Company
may not:
·
create, incur, assume or suffer to exist, any indebtedness, contingent and otherwise, which should, in accordance with generally
accepted accounting principles consistently applied, be classified upon the Company's balance sheet as liabilities and which would
be senior or pari passu in right of payment to the notes, except for: (i) secured or unsecured debt issued to a bank or financial
institution on commercially reasonable terms, or (ii) any other debt not to exceed $5 million, individually, or in the aggregate;
·
may not permit its subsidiaries to, engage in any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner, in each case in excess of $50,000, other than: (i) for payment of reasonable salary
for services actually rendered, as approved by the Board of Directors of the Company as fair in all respects to the Company, (ii)
reimbursement for expenses incurred on behalf of the Company, (iii) transactions and written arrangements in existence on the date
of the initial issuance of the notes, and any amendments, modifications, cancellations, terminations, limitations and waivers approved
by a majority of the independent disinterested directors of our company; and
·
may not permit any subsidiary to: (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock
or such subsidiaries (other than dividends and distributions from a subsidiary to the Company) or (ii) purchase or otherwise acquire
for value, directly or indirectly, any shares or other equity security of the Company, other than the notes or warrants.
2011 Warrants
The Warrants are exercisable at $4.25 per
share, subject to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Cashless exercise
is permitted if the average trading volume of the Company's common stock during at least five (5) of the ten (10) consecutive
trading days immediately preceding the date of the notice of exercise is at least 10,000 shares, and will be based upon the average
of the last sale price of the common stock during the five (5) consecutive trading days prior to the notice of exercise. In certain
instances, a holder shall not be permitted to exercise the Warrant if such exercise would result in such holder's total ownership
of the Company's common stock exceeding 4.9%. Depending on when the warrants were issued, the warrants expire on November
1, 2016, November 18, 2016 or December 9, 2016.
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Preferred
Stock
Subject to the provisions of the certificate
of incorporation and limitations prescribed by law, the board of directors has the authority, without further vote or action by
the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions of the preferred stock, including:
·
dividend rights;
·
dividend rates;
·
conversion rates;
·
voting rights;
·
terms of redemption;
·
redemption prices;
·
liquidation preferences;
·
sinking funds;
·
other rights, preferences and restrictions applicable to each series; and
·
the number of shares constituting any series or the designation of the series, which may be senior to those of the common stock.
We have no present plans to issue any shares
of preferred stock.
One of the effects of undesignated preferred
stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means
of a tender offer, proxy contest, and merger or otherwise, and, as a result, protect the continuity of our management. The issuance
of shares of the preferred stock under the board of directors' authority described above may adversely affect the rights
of the holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly,
the issuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the market
price of our common stock.
Other Outstanding Options and Warrants
As of September 13, 2012, we have outstanding
common stock purchase warrants to purchase an aggregate of 7,430,566 shares of our common stock exercisable at prices ranging from
$2.00 to $25.00 and expiring on various dates commencing February 2013 through August 2016. These warrants were issued primarily
in connection with capital raising transactions we engaged in prior to this offering as well as for services rendered. The warrants
are subject to customary anti-dilution rights.
Also as of September 13, 2012, we have outstanding
options to purchase an aggregate of 641,385 shares of our common stock exercisable at prices ranging from $2.00 to $18.00 and expiring
on various dates commencing February 2013 through October 2020. These options were granted primarily as an inducement to the employment
of various employees, consultants and contractors. The warrants are subject to customary anti-dilution rights.
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Preemptive Right
Mr. Patterson's amended employment
agreement provides him with a preemptive right, pursuant to which Mr. Patterson has the right, but not the obligation, to maintain
his then pro rata share of our issued and outstanding shares and warrants by purchasing additional shares and warrants each time
we offer shares and/or warrants for sale.
Certificate of Incorporation and Bylaws
Limitation of Liability of Officers
and Directors
Our certificate of incorporation provides
that no director shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability:
·
for any breach of the director's duty of loyalty to us or our stockholders;
·
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
·
under Section 174 of the Delaware General Corporation Law for unlawful payment of a dividend or unlawful stock purchase or
stock redemption; or
·
for any transaction from which the director derived an improper personal benefit.
To the extent that the Delaware General Corporation
Law is amended to provide for further limitations on the personal liability of our directors, our certificate of incorporation
shall be deemed to include such further limitations. Our second amendment and restated bylaws also provide, with certain exceptions,
for indemnification to the fullest extent permitted by the Delaware General Corporation Law.
We have also entered into indemnification
agreements with all of our directors, other than Mark Patterson. These indemnification agreements, among other things,
·
provide for indemnification which mirrors the provisions of the Delaware General Corporation Law;
·
provide for the mandatory advancement by us of expenses incurred by the director, provided that such director will repay the
amounts advanced if it is determined that the director was not entitled to be indemnified by us;
·
provide further indemnification to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically
authorized in our certificate of incorporation, as amended, or second amendment and restated bylaws, or the Delaware General Corporation
Law; and
·
provide that if the Delaware General Corporation Law is subsequently amended to increase the rights of directors to indemnification,
those increased rights will be deemed to apply to us, but if such rights are narrowed, there will be no affect on the indemnification
granted to the directors.
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However, a director is not entitled to indemnification
under these agreements with respect to (i) claims initiated by the director (except claims relating to the director's right
to indemnification), (ii) claims relating to the director's right to indemnification that a court of competent jurisdiction
determines were not made in good faith or were frivolous; (iii) expenses or liabilities for which a directors' and officers'
liability insurance policy has paid the director directly; or (iv) expenses or payment of profits arising from the violation by
the director of Section 16(b) of the Exchange Act, or any successor statute.
Mr. Patterson's employment agreement
provides that we will indemnify him to the greatest extent permitted by Section 145 of the Delaware General Corporation Law. These
indemnification rights will survive the termination of Mr. Patterson's employment for any reason.
The effect of these provisions is to eliminate
our rights and our stockholders' rights, through stockholders' derivative suits on our behalf, to recover monetary
damages against a director for a breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior,
except in the situations described above.
Business Combination Under
Delaware Law
We are subject to the provisions of Section
203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of three years after the date
of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed
manner.
Section 203 defines a "business combination"
as a merger, asset sale or other transaction resulting in a financial benefit to, or increased ownership of us by, the interested
stockholders. A "business combination" includes a merger or sale of more than 10.0% of our assets.
Section 203 defines an "interested
stockholder" as:
·
a stockholder who owns 15% or more of our outstanding voting stock; or
·
our affiliate or associate that was the owner of 15% or more of our outstanding voting stock at any time within the three-year
period immediately prior to the date of determination of whether such person is an interested stockholder, and the affiliates and
associates of such person.
Under Section 203, a business combination
between us and an interested stockholder is prohibited unless:
·
our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming
an interested stockholder prior to the date the person attained such status;
·
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding, for purposes of determining
the number of shares outstanding, shares owned by persons who are directors and also officers, and employee stock plans under which
employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in
a tender or exchange offer; or
81
·
the business combination is approved by our board of directors on or subsequent to the date the person became an interested
stockholder and is authorized at an annual or special meeting of the stockholders by the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
This provision has an anti-takeover effect
with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might
result in a premium over the market price for the shares of our common stock. With approval of our stockholders, we could amend
our certificate of incorporation in the future to elect not to be governed by the anti-takeover law.
Amendment of Bylaws
Our bylaws may generally be altered, amended
or repealed, and new bylaws may be adopted, by:
·
the affirmative vote of holders of not less than 75% of the voting power of our outstanding shares of capital stock entitled
to vote in the election of directors, voting together as a single class; or
·
the affirmative vote of a majority of directors present at any regular or special meeting where there is a quorum of directors
present, provided that any alteration, amendment or repeal of, or adoption of any bylaw inconsistent with, specified provisions
of the bylaws, including those related to special and annual meetings of stockholders, the number and term of directors, nomination
of directors, special meetings of directors, removal of directors, committees of the board of directors and indemnification of
directors and officers, requires the affirmative vote of at least 75% of all directors then in office at a regular or special meeting
called for that purpose.
Other Limitations on Stockholder
Actions
Our bylaws also impose some procedural requirements
on stockholders who wish to:
·
make nominations in the election of directors;
·
propose that a director be removed; or
·
propose any other business to be brought before an annual meeting of stockholders.
Under these procedural requirements, a stockholder
nomination must include evidence that the nominator is a stockholder, and should include:
·
the name and address of the nominator;
·
the number of shares of each class or series of our capital stock beneficially owned by the nominator;
·
the name and address of each of the persons with whom the nominator is acting in concert, and the number of shares of our capital
stock beneficially owned by such persons; and
·
a description of all arrangements or understandings between the nominator and the nominee pursuant to which the nomination
is being made.
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The nominator must also provide biographical
information on their nominee, including:
·
the nominee's name, age, business address and residence address;
·
the principal occupation or employment of the nominee;
·
the number of shares of our capital stock beneficially owned by the nominee;
·
the written consent of the nominee to having such person's name placed in nomination at the meeting and to serve as a
director as elected;
·
any other information regarding the nominee that is required pursuant to Regulation 14A of the Exchange Act; and
·
a notarized affidavit from the nominee stating that, if elected, he or she will serve and he or she is eligible for election
as a member of our board of directors.
To bring a proposal to remove a director
before an annual meeting of our stockholders, a stockholder must deliver to our Secretary:
·
notice of the proposal;
·
a statement of the grounds on which such director is proposed to be removed;
·
the number of shares beneficially owned by the stockholder and evidence of such ownership;
·
a list of the names and address of the other beneficial owners of shares of our capital stock with whom the stockholder is
acting in concert, and the number of shares beneficially owned by each such beneficial owner.
In order to bring any other proposal before
an annual meeting of stockholders, a stockholder must deliver timely notice of a proposal pertaining to a proper subject for presentation
at the meeting to our corporate secretary along with the following:
·
a brief description of the business to be brought before the meeting and the reasons for conducting such business at the meeting;
·
the name and address of the stockholder proposing such business;
·
the number of shares beneficially owned by the stockholder and evidence of such ownership;
·
a description of all arrangement or understandings between such stockholder and any other person or persons (including their
names and the number of our shares beneficially owned by them) in connection with the proposal of such business;
·
any material interest of the stockholder in the proposal; and
·
a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business
before the meeting.
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To be timely in connection with an annual
meeting of stockholders, a stockholder must generally deliver notice of a nomination, proposal to remove a director, or other business
not less than 120 nor more than 180 days prior to the date on which the annual meeting of stockholders was held in the immediately
preceding year, but in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the
anniversary date of the preceding annual meeting of stockholders, a stockholder notice will be timely if received by us not later
than the close of business on the later of (1) the 120th day prior to the annual meeting and (2) the 10th day following the day
on which we first publicly announce the date of the annual meeting.
To be timely in connection with the election
of a director at a special meeting of stockholders, a stockholder nomination must be received not less than 40 nor more than 60
days prior to the date of the special meeting, but in the event that less than 55 days' notice or prior public disclosure
of the date of the special meeting of the stockholders is given or made to the stockholders, a stockholder nomination will be timely
if received by us not later than the close of business on the 10th day following the day on which a notice of the date of the special
meeting was mailed to the stockholders or the public disclosure of that date was made.
Registration Rights
Two holders of an aggregate 60,000 shares
of our common stock and a warrant to purchase 60,000 shares of our common stock have the right to have such shares, including the
shares issuable on exercise of the warrant, included in any registration statement to be filed by us under the Securities Act,
subject to the right of the underwriter in such offering the reduce the number of the holder's shares to be registered in
view of market conditions. We have filed a registration statement covering such securities.
We also entered into a registration rights
agreement with the subscribers and the placement agent in connection with the private placement of the notes and warrants. Pursuant
to the registration rights agreement, we agreed to file a registration statement within 90 days after the closing date of the offering
to register for resale or the notes, the warrants, the shares of common stock issuable upon conversion of the notes and exercise
of the warrants (collectively, referred to as the Registrable Securities). In the event that the SEC limits the number of Registrable
Securities that may be included in the registration statement, we shall include only those Registrable Securities permitted by
the Securities and Exchange Commission, or SEC, and shall file additional registration statements at the earliest practicable date
as we are permitted to do so in accordance with SEC guidelines. We shall use our best efforts to cause (i) the Registration Statement
to be effective within 150 days of the offering, and (ii) any additional registration statements to be declared effective within
90 days of the required filing date.
In the event that a registration statement
is not filed or declared effective by the SEC by the applicable deadline, we will pay to the holders of Registrable Securities
an amount equal to 1% of the original principal amount of the investor's note, multiplied by a fraction with the numerator
equal to the number of Registrable Securities that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the notes and exercise of the warrants purchased pursuant
to the subscription agreement and owned by such holder.
Transfer Agent and Registrar
The transfer agent and warrant agent and
registrar for our common stock is American Stock Transfer & Trust Company. Its address is 6201 15th Avenue, Brooklyn, NY 11219,
and its telephone number is (718) 921-8261.
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MATERIAL U.S. FEDERAL
INCOME TAX CONSIDERATIONS
The
following is a general discussion of certain material U.S. federal income tax consequences relevant to U.S. holders (as described
below) of Notes, common stock received upon conversion of the Notes or exercise of the Warrants (the "common stock")
and, in certain circumstances, Warrants.
For
purposes of this discussion, a "U.S. holder" means a beneficial owner of a Note, common stock, or a Warrant that is
any of the following for U.S. federal income tax purposes:
·
An individual who is a citizen or resident of the United States or someone treated as a U.S.
citizen for U.S. federal income tax purposes;
·
A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof, or the District of Columbia (and certain entities
formed outside the United States and treated as U.S. corporations under specialized sections of the Internal Revenue Code of 1986,
as amended (the "Code"));
·
An estate, the income of which is subject to U.S. federal income taxation regardless of its
source; or
·
A trust if: (a) a U.S. court can exercise primary supervision over the trust's administration
and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (b) the trust was in existence
on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations (as defined below) to be treated as
a U.S. person.
This
summary is for general information purposes only and is not exhaustive of all of the U.S. federal income tax considerations that
may be relevant to a decision to purchase Notes, common stock, or Warrants, nor any tax consequences arising under other federal
tax laws (e.g., estate and gift tax) or under the laws of any state, local or foreign jurisdiction. This discussion is based upon
current provisions of the Code, Treasury Regulations promulgated under the Code by the U.S. Treasury Department (including proposed
and temporary regulations (the "Treasury Regulations")), rulings, current administrative interpretations, and official
pronouncements by the Internal Revenue Service (the "IRS"), and judicial decisions, all as currently in effect and
all of which are subject to differing interpretations or to change, including possibly with a retroactive effect. Such changes
could materially and adversely affect the tax consequences to a holder described below. No assurance can be given that the IRS
will not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
In
addition, the possible application of U.S. federal estate or gift taxes or any aspect of state, local, or non-U.S. tax laws is
not considered. This summary does not address all aspects of U.S. federal income taxation that may be important to a particular
U.S. holder in light of its investment or tax circumstances. This summary is not intended to be applicable to special categories
of investors, including but not limited to dealers in securities, banks, insurance companies, real estate investment trusts, regulated
investment companies, controlled foreign corporations, tax-exempt organizations, U.S. expatriates, persons that hold the Notes,
common stock and Warrants as part of a straddle or conversion transaction, partnerships or other pass-through entities that purchase,
own or dispose of the Notes, common stock and Warrants, and holders subject to the alternative minimum tax.
85
In
addition, this discussion is limited to U.S. holders who hold the Notes, common stock, and Warrants as capital assets (generally
property held for investment), and initial purchasers of Notes who acquire the Notes at the original issue price within the meaning
of Section 1273 of the Code. This summary also assumes that the IRS will respect the classification of the Notes as indebtedness
for U.S. federal income tax purposes. We have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the
U.S. federal income tax consequences of acquiring or holding a Note, common stock, or Warrant.
If
a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds a Note,
common stock, or Warrant, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the
status of the partner and the activities of the partnership. A holder of a Note, common stock, or Warrant that is a partnership
and partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of holding
and disposing of the Note, common stock, or Warrant.
THE
FOREGOING SUMMARY OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. IT DOES NOT
DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A U.S. HOLDER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. PROSPECTIVE U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES THAT
WOULD RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, COMMON STOCK, AND WARRANTS, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS (INCLUDING ESTATE AND GIFT TAX RULES) AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS, AS WELL AS THE APPLICATION UNDER ANY APPLICABLE TAX TREATY.
Issuance
of a Unit
A
Note and Warrant will constitute an investment unit (a "Unit"). For purposes of determining a U.S. holder's basis
in each Unit, the amount paid to acquire the Unit will be allocated between the Note and Warrant based on their respective relative
fair market values as determined by the Company. The allocation by the Company will be binding on each U.S. holder, unless the
U.S. holder explicitly discloses (in a statement attached to the U.S. holder's timely filed U.S. federal income tax return
for the year that includes the acquisition date of the Unit) that his allocation of a Unit's issue price between the Notes
and the Warrants is different from the Company's allocation. The Company's determination of the allocation is not binding
on the IRS and is not necessarily indicative of prices at which the Notes or Warrants may actually trade. The balance of this discussion
assumes that the Company's allocation will be respected for U.S. federal income tax purposes.
Exchange
of Outstanding Debentures of the Company for Units
Certain
holders were issued Units in exchange for the cancellation of outstanding notes or debentures of the Company (the "Debentures").
It is our understanding, and the following discussion assumes, that the face amount of each U.S. holder's retired Debenture
is equal to the fair market value of the Units issued to each holder as determined on the date of issuance
and, therefore, there is no cancellation of indebtedness income. However, this determination
is not binding on the IRS, and the IRS may take a contrary position regarding this issue.
86
U.S.
Holders
Original Issue Discount
The allocation of a portion of the purchase
price to the Warrants will cause the Notes to be issued with original issue discount ("OID") for United States federal
income tax purposes. Accordingly, each U.S. Holder will be required to include in income (regardless of whether such U.S. Holder
is a cash or accrual basis taxpayer) in each taxable year, in advance of the receipt of cash payments on such Notes, that portion
of the OID, computed on a constant interest rate basis, attributable to each day during such year on which the U.S. Holder held
the Note. See "U.S. Holders — Taxation of Original Issue Discount" below. The amount of OID with respect to each
Note will be equal to the excess of (i) its "stated redemption price at maturity" over (ii) its "issue price."
Under the OID Regulations, the "stated
redemption price at maturity" of each Note will include all payments to be made in respect thereof, other than payments of
"qualified stated interest" (i.e., interest that is unconditionally payable at least annually).
The
"issue price" of the Notes is the first price at which a substantial amount of the Notes are sold. For this purpose,
sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or
wholesalers are ignored. Because the Notes were issued as part of an "investment unit" for United States federal income
tax purposes, the first price at which a substantial amount of the Notes are sold will be determined by allocating the issue price
to the Notes and Warrants based on their relative fair market values, as determined on the date of issuance.
Taxation of Original Issue Discount
A
U.S. holder of a debt instrument issued with OID is required to include in its gross income for U.S. federal income tax purposes
an amount equal to the sum of the "daily portions" of such OID for all days during the taxable year in which such holder
holds the debt instrument, including the purchase date and excluding the disposition date. The daily portions of OID required to
be included in a U.S. holder's gross income in a taxable year will be determined on a constant interest rate basis by allocating
to each day during the taxable year on which the holder holds the debt instrument a pro rata portion of the OID on such debt instrument
which is attributable to the "accrual period" in which such day is included. The amount of the OID on a Note attributable
to each accrual period will be the product of (i) its "adjusted issue price" at the beginning of such accrual period
multiplied by (ii) its "yield to maturity." The "adjusted issue price" of a Note at the beginning of an
accrual period will be its issue price plus the aggregate amount of OID that accrued in all prior accrual periods (determined without
regard to the rules described below concerning acquisition premium) less any cash payments on the Note. The Note's "yield
to maturity" is that discount rate which, when used in computing the present value of all principal and stated interest payments
to be made on a Note, produces an amount equal to its issue price.
Acquisition Premium
If a U.S. holder purchases a Note issued
with OID at an "acquisition premium," the amount of OID that the U.S. holder includes in gross income is reduced to
reflect the acquisition premium. A Note is purchased at an acquisition premium if its adjusted basis, immediately after its purchase,
is (a) less than or equal to the sum of all amounts payable on the Note after the purchase date other than payments of qualified
stated interest and (b) greater than the Note's issue price.
87
If a Note is purchased at an acquisition
premium, the U.S. holder reduces the amount of OID that otherwise would be included in income during an accrual period by an amount
equal to (i) the amount of the OID otherwise includible in income multiplied by (ii) a fraction, the numerator of which is the
excess of the adjusted basis of the note immediately after its acquisition by the purchaser over the issue price of the Note and
the denominator of which is the excess of the sum of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note's issue price.
As an alternative to reducing the amount
of OID that otherwise would be included in income by this fraction, the U.S. holder may elect to compute OID accruals by applying
the constant yield method described above.
Market Discount
If a U.S. holder acquires a Note at a cost
that is less than its issue price, the amount of such difference is treated as market discount for U.S. federal income tax purposes,
unless such difference is
de minimis
. Such difference will be
de minimis
if it is an amount less than .0025 multiplied
by the stated redemption price at maturity of the note multiplied by the number of complete years to maturity of the note (from
the date of acquisition). The Company does not believe that the OID on the Notes should not be treated as
de minimis
for
these purposes.
Under the market discount rules of the Code,
a U.S. holder is required to treat any payment that does not constitute a payment of qualified stated interest on, or any gain
on the sale, exchange, retirement, or other disposition of, a Note as ordinary income to the extent of the accrued market discount
that has not previously been included in income. If such Note is disposed of by the U.S. holder in certain otherwise nontaxable
transactions, accrued market discount must be included as ordinary income by the U.S. holder as if the holder sold the Note at
its then fair market value. If a Note with accrued market discount is converted into common stock pursuant to the conversion feature,
the amount of such accrued market discount not previously included in income generally will be taxable as ordinary income on the
disposition of the common stock.
In general, the amount of market discount
that has accrued is determined on a ratable basis. A U.S. holder may, however, elect to determine the amount of accrued market
discount on a constant yield to maturity basis. This election is made on a note-by-note basis and is irrevocable.
With respect to Notes with market discount,
a U.S. holder may not be allowed to deduct immediately a portion of the interest expense on any indebtedness incurred or continued
to purchase or to carry the Notes. A U.S. holder may elect to include market discount in income currently as it accrues, in which
case the interest deferral rule set forth in the preceding sentence will not apply. This election will apply to all debt instruments
acquired by the U.S. holder on or after the first day of the first taxable year to which the election applies and is irrevocable
without the consent of the IRS. A U.S. holder's tax basis in a Note will be increased by the amount of market discount included
in the holder's income under the election.
Interest Deduction for the Company
At the Company's option, interest
on the Notes may be payable in: (i) cash or (ii) shares of common stock. Because interest on the Company's Notes is payable
in equity at the Company's option and there is substantial certainty that the option will be exercised, the Company will
generally be denied a deduction for interest paid or accrued on the Notes.
88
Sale, Exchange or Other Taxable
Disposition of the Notes
Upon the sale, exchange, or other taxable
disposition of a Note, a U.S. holder generally will recognize U.S. source gain or loss equal to the difference between the amount
realized upon the sale, exchange, or other disposition (less an amount equal to any accrued but unpaid interest, which will be
taxable as interest income to the extent not previously included in income tax by the U.S. holder) and the adjusted tax basis of
the Note. A U.S. holder's adjusted tax basis in a Note will, in general, be its cost of that Note to such U.S. holder (i.e.,
the portion of the Unit purchase price allocated to such Note), increased by any OID and any market discount that the U.S. holder
previously elected to include in income prior to the disposition.
Subject to the discussion of market discount
above, any gain or loss will be capital gain or loss to the U.S. holder. Capital gains of noncorporate U.S. holders (including
individuals) derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. Currently,
the long-term capital gains rate is 15%, although the actual rates may be higher due to the phase out of certain tax deductions,
exemptions and credits. After 2012, the maximum rate on long-term capital gains is scheduled to be 20%. However, given the uncertain
economic conditions in the United States and the size of the federal deficit, tax rates are subject to change and prospective U.S.
holders should consult their tax advisors. The deductibility of capital losses is subject to limitations.
Conversions of Notes into Common Stock
A U.S. holder generally will not recognize
any income, gain, or loss upon conversion of a Note into common stock except that the fair market value of the common stock received
with respect to accrued interest (which will be taxable as ordinary interest income) and except with respect to cash received in
lieu of a fractional share of common stock. The adjusted tax basis of shares of common stock received on conversion will equal
the adjusted tax basis of the Note converted (increased by the amount of income recognized upon conversion with respect to accrued
interest, and reduced by the portion of adjusted tax basis allocated to any fractional share of common stock exchanged for cash).
The holding period of such common stock received on conversion will generally include the period during which the converted Note
was held prior to conversion, except that the holding period of any common stock received with respect to accrued interest will
commence on the date after conversion.
Cash received in lieu of a fractional share
of common stock should generally be treated as a payment in exchange for such fractional share of common stock, not a dividend.
Gain or loss recognized on the receipt of cash paid in lieu of such fractional share generally will equal the difference between
the amount of cash received and the amount of tax basis allocable to the fractional share.
Constructive Distributions
The conversion price of the Notes and Warrants
are subject to adjustment under certain circumstances. Section 305 of the Code and the Treasury Regulations issued thereunder may
treat the U.S. holders of the Notes and Warrants as having received a constructive distribution, resulting in ordinary income (subject
to a possible dividends received deduction in the case of corporate holders) to the extent of our current and/or accumulated earnings
and profits, if, and to the extent that, certain adjustments in the conversion price (particularly an adjustment to reflect a taxable
dividend to holders of common stock) increase the proportionate interests of the holders in our assets or earnings and profits.
Such a constructive distribution may occur whether or not such holder ever exercises its conversion privilege. Therefore, U.S.
holders may recognize income in the event of a deemed distribution even though they may not receive any cash or property. Moreover,
if there is not a full adjustment to the conversion ratio of the Notes and/or Warrants to reflect an event increasing the proportionate
interest of the holders of outstanding common stock in our assets or earnings and profits, then such increase in the proportionate
interest of the holders of the common stock generally will be treated as a distribution to such holders, taxable as ordinary income
(subject to a possible dividends received deduction in the case of corporate holders) to the extent of our current and/or accumulated
earnings and profits. Adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula which has
the effect of preventing dilution in the interest of the holders of the debt instruments, however, will generally not be considered
to result in a constructive dividend distribution. The rules with respect to adjustments are complex and holders of Notes and Warrants
should consult their own tax advisors regarding the applicability of such rules.
89
Warrants to Purchase Common Stock
Generally,
no U.S. federal income tax will be imposed upon the U.S. holder of a Warrant upon exercise of such Warrant to acquire common stock
of the Company.
A U.S. holder's tax basis in a Warrant will generally equal the portion of the issue price of the
Unit allocable to the Warrant pursuant to the rules described above under "Issuance of a Unit." Upon exercise of a
Warrant, the tax basis of the common stock would be equal to the sum of the tax basis of the Warrants in the hands of the U.S.
holder plus the exercise price paid (if any), and the holding period of the new common stock would begin on the date that the Warrants
are exercised. If a Warrant lapses without exercise, the holder will generally realize a capital loss equal to its adjusted tax
basis in the Warrant. Prospective U.S. Holders should consult their tax advisors regarding the tax consequences of acquiring, holding
and disposing of Warrants.
For
a discussion of the sale, exchange or other disposition (including repurchase by the Company) of a Warrant other than the exercise
of the Warrant, see "U.S. Holders — Sale, Redemption or Other Taxable Disposition of Common Stock" below.
Sale, Redemption, or Other Taxable
Disposition of Common Stock
For
a discussion of the sale, exchange or other taxable disposition of the common stock, see "U.S. Holders — Sale, Exchange
or Other Taxable Disposition of the Notes" below.
A
redemption of common stock may be treated either as a distribution or as a sale transaction. A redemption of common stock shall
be treated as a sale transaction if all of the U.S. holder's interest in the Company is redeemed or certain other tests are
met which generally involve a sufficient reduction in the U.S. holder's interest (determined under certain constructive ownership
rules) in the Company. A redemption of Warrants will be treated as a sale transaction. If sale treatment applies, the tax treatment
of the U.S. holder will be as described below with respect to the sale of Notes (See "U.S. Holders — Sale, Exchange
or Other Taxable Disposition of the Notes"). Alternatively, the entire amount of the cash or property received on a redemption
may be treated as a distribution. The U.S. holder's basis in the redeemed common stock, to the extent not treated as reduced
through a return of capital distribution, would be transferred to the U.S. holder's remaining shares of the Company's
common stock.
Net Operating Loss Carry Forwards
The
utilization of net operating loss carry forwards is limited under the change in stock ownership rules pursuant to Section 382 of
the Code. 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. It is unknown whether this Offering would
result in further limitation on the Company's use of its net operating loss carry forwards.
90
New Legislation Regarding Medicare
Tax
For
taxable years beginning after December 31, 2012, a U.S. holder that is an individual or estate, or a trust that does not fall into
a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. Holder's
"net investment income" for the relevant taxable year and (2) the excess of the U.S. holder's modified gross
income for the taxable year over a certain threshold (which, in the case of individuals, will be between $125,000 and $250,000
depending on the individual's circumstances). A U.S. holder's "net investment income" may generally include,
among other items, certain interest, dividends, gain, and other types of income from investments, minus the allowable deductions
that are properly allocable to that gross income or net gain. A U.S. holder that is an individual, estate or trust should consult
its tax advisor regarding the applicability of the Medicare tax to certain payments relating to the Notes, common stock and Warrants.
Information Reporting and Backup
Withholding
Generally,
a U.S. holder may be subject to backup withholding, currently at a rate of twenty-eight percent (28%), with respect to certain
reportable payments, including interest payments (including OID), dividend payments, principal payments on the Notes, and proceeds
from the sale or other disposition of the Notes, Warrants or common stock. Unless a U.S. holder is an exempt recipient, backup
withholding may apply to such payments in certain circumstances, including if the U.S. holder:
·
fails to furnish a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after a request therefor;
·
furnishes an incorrect TIN;
·
is notified by the IRS that the U.S. holder has failed to report interest or dividends properly;
·
under certain circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN furnished is correct and that the U.S. holder is not subject to backup withholding imposed by the IRS;
or
·
otherwise fails to comply with backup withholding rules.
A
U.S. holder will generally not be subject to backup withholding if it provides a properly and timely completed IRS Form W-9 to
the applicable payor.
Any
amount withheld from a payment to a U.S. holder under the backup withholding rules is creditable against the U.S. holder's
U.S. federal income tax liability and may entitle the U.S. holder to a refund provided that the requisite information is timely
furnished to the IRS. The Company will report to the U.S. holder and to the IRS the amount of any reportable payments for each
calendar year and the amount of tax withheld, if any, with respect to the reportable payments.
91
Tax
Consequences to Non-U.S. Holders
U.S. Trade or Business
Income
For
purposes of the following discussion, interest, dividends and gain on the sale, exchange or other taxable disposition of a Note,
common stock or Warrants will be considered to be a "U.S. trade or business income" if such income or gain is (a) effectively
connected with the conduct by a Non-U.S. holder of a U.S. trade or business and (b) in the case of a Non-U.S. holder eligible for
the benefits of an applicable U.S. bilateral income tax treaty, attributable to a permanent establishment (or, in the case of an
individual, a fixed base) maintained by the Non-U.S. holder in the United States.
If
a Non-U.S. holder's income and gain in respect of a Note, Warrants or common stock is U.S. trade or business income and,
if required by an applicable tax treaty as a condition for taxation, such income and gain is attributable to a United States permanent
establishment, then such Non-U.S. holder will be subject to regular U.S. federal income tax on this income and gain in generally
the same manner as U.S. holders, and U.S. federal income tax return filing requirements will apply. In the case of a Non-U.S. holder
that is a corporation, such U.S. trade or business income also may be subject to the branch profits tax (which is generally imposed
on a foreign corporation on the actual or deemed repatriation from the United States of earnings and profits attributable to U.S.
trade or business income) at a 30% rate (subject to reduction pursuant to an applicable income tax treaty). To claim the benefit
of a tax treaty or to claim exemption from withholding because the income is U.S. trade or business income, the Non-U.S. holder
must timely provide a properly executed IRS Form W-8ECI (or appropriate substitute or successor form). In addition, a Non-U.S.
holder may under certain circumstances be required to obtain a U.S. taxpayer identification number and make certain certifications
to us.
The
following discussion assumes that the income and gain in respect of a Note, Warrants or common stock is not U.S. trade or business
income.
Interest on the Notes
The
gross amount of payments of interest (including a payment with respect to accrued OID, if any) to a Non-U.S. holder of interest
that are not U.S. trade or business income will generally be subject to U.S. federal income tax at the rate of 30%, unless a U.S.
income tax treaty applies to reduce or eliminate withholding. To claim the benefit of a tax treaty, the Non-U.S. holder must provide
a properly executed IRS Form W-8BEN (or appropriate substitute or successor form) prior to the payment of interest. In addition,
a Non-U.S. holder may under certain circumstances be required to obtain a U.S. taxpayer identification number and make certain
certifications to us. Special procedures are provided for payments through qualified intermediaries. A Non-U.S. holder of a Note
that is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of amounts
withheld at a higher rate by filing an appropriate claim for a refund with the IRS.
Constructive Distributions
Any
deemed dividends resulting from certain adjustments, or failure to make adjustments, to the conversion formula (see "—
Tax Consequences to U.S. Holders — Constructive distributions" above) will be subject to withholding tax at a rate
of 30% or such lower rate as may be specified by an applicable tax treaty, unless they are effectively connected with such Non-U.S.
holder's conduct of a trade or business in the United States and, if required by an applicable income tax treaty as a condition
for taxation, are attributable to a United States permanent establishment, in which case such constructive distributions would
instead be subject to U.S. federal income tax on a net income basis as described above under "Non-U.S. Holders — U.S.
Trade or Business Income." A withholding agent may be required to withhold the appropriate amount with respect to a constructive
distribution even though there is no related receipt of cash from which to satisfy the withholding obligation. Non-U.S. holders
should consult their tax advisors regarding the consequences of constructive distributions.
92
Conversion
A
Non-U.S. holder generally will not be subject to U.S. federal income tax on the conversion of Notes into common stock. However,
gain (if any) attributable to the receipt of cash in lieu of a fractional share, or interest not previously included in gross income,
will be subject to U.S. federal income tax if it is U.S. trade or business income, and common stock received with respect to accrued
interest may be taxed as a payment of interest as described above under "Non-U.S. Holders — Interest".
Sales, Exchange or Other
Taxable Disposition of Notes, Common Stock or Warrants
Except
as described below and subject to the discussion concerning backup withholding, any gain realized by a Non-U.S. holder on the sale,
exchange or other taxable disposition of a Note, common stock or Warrants generally will not be subject to U.S. federal income
tax, unless (a) such gain is U.S. trade or business income, (b) subject to certain exceptions, the Non-U.S. holder is an individual
who holds the Note, common stock or Warrants as a capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, (c) the Non-U.S. holder is subject to tax pursuant to the provisions of U.S. federal income tax
law applicable to certain U.S. expatriates (including certain former citizens or residents of the United States), or (d) we are
a United States real property holding corporation within the meaning of Section 897 of the Code. We do not believe that we are
currently a "United States real property holding corporation" within the meaning of Section 897 of the Code, or that
we will become one in the future.
HIRE Act
The
Hiring Incentives to Restore Employment Act (the "HIRE Act") generally provides that, beginning January 1, 2014, a
30% withholding tax may be imposed on payments of U.S. source income and proceeds from the sale of property that could give rise
to U.S. source interest or dividends to certain non-U.S. entities unless such entities enter into an agreement with the IRS to
disclose the name, address and taxpayer identification number of certain U.S. persons that own, directly or indirectly, interests
in such entities, as well as certain other information relating to such interests. Non-U.S. holders are encouraged to consult with
their own tax advisors regarding the application of the HIRE Act.
Information Reporting and Backup
Withholding
Generally,
we must report annually to the IRS and to each Non-U.S. holder any interest or dividend (including the amount of any constructive
dividends paid) that is subject to U.S. federal withholding tax and the amount of any tax withheld. These reporting requirements
apply even if withholding was not required or was reduced or eliminated pursuant to an applicable income tax treaty. Copies of
these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities
of the country in which the Non-U.S. holder resides. Under certain circumstances, we will have to report to the IRS payments of
principal.
Information
reporting and backup withholding (currently at a rate of 28%) may apply to payments made by us or any agent of ours to Non-U.S.
holders if the payee fails to make the appropriate certification that the holder is a non-U.S. person or if we or our paying agent
has actual knowledge that the payee is a U.S. person.
93
The
payment of the proceeds from the disposition of the Notes, common stock or Warrants to or through the U.S. office of any broker,
U.S. or foreign, will be subject to information reporting and possible backup withholding, as discussed above, unless the owner
certifies as to its Non-U.S. holder status under penalty of perjury or otherwise establishes an exemption, provided that the broker
does not have actual knowledge that the holder is a U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a Note, common stock or Warrants to or through a non-U.S. office
of a non-U.S. broker that is not a U.S. related person will generally not be subject to backup withholding.
However,
if such broker is (a) a U.S. person, (b) a controlled foreign corporation for United States tax purposes, (c) a foreign person
50% or more of whose gross income from all sources for certain periods is effectively connected with a United States trade or business
or (d) a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons (as defined in Treasury
Regulations) who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during
its tax year, such foreign partnership is engaged in a U.S. trade or business, such payments will be subject to information reporting,
but not backup withholding, unless such broker has documentary evidence in its files of the Non-U.S. holder's foreign status
and certain other conditions are met or you otherwise establish an exemption. Both backup withholding and information reporting
will apply to the proceeds of such dispositions if the broker has actual knowledge that the payee is a U.S. person.
Any
amounts withheld under the backup withholding rules from a payment to a Non-U.S. holder will be allowed as a refund or a credit
against such Non-U.S. holder's U.S. federal income tax liability, provided that the requisite procedures are followed.
The
preceding discussion of certain U.S. federal income tax consequences is intended for general information only and does not constitute
tax advice. Each investor should consult its own tax adviser as to particular tax consequences to it of purchasing, holding and
disposing of the Notes, common stock and Warrants, including the applicability and effect of any state, local or foreign tax laws,
and of any proposed changes in applicable laws.
94
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling
persons in the successful defense of any action, suit or proceeding) is asserted by that director, officer or controlling person
in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether that indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of that issue.
LEGAL MATTERS
The validity of the securities offered hereby
will be passed upon for us by Blank Rome LLP, New York, New York.
EXPERTS
The financial statements for Boomerang Systems,
Inc. as of and for the fiscal years ended September 30, 2011 and 2010 included in this Prospectus have been so included in reliance
on the report of Liebman Goldberg & Hymowitz, LLP, an independent registered public accounting firm, given on the authority
of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND
MORE INFORMATION
We file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange Commission, or "SEC."  You may read
and copy any documents we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  In addition,
our filings with the SEC are available to the public through the SEC's Internet site at http://www.sec.gov.  Information
about us is also available on our website at http://www.boomerangsystems.com.  This URL and the SEC's URL above
are intended to be inactive textual references only.  The information on the SEC's website and our website is not
part of, and is not incorporated into, this prospectus.
We have filed a registration statement covering
our units subject to this offering, of which this prospectus forms a part.  This prospectus, however, does not contain
all of the information set forth in the registration statement and the exhibits to the registration statement.  For further
information concerning us and the securities we may offer and sell, you should read the entire registration statement and the exhibits
to the registration statement. The registration statement has been filed electronically and may be obtained in any manner listed
above.  Any statements contained in this prospectus concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as an exhibit to the registration statement or otherwise
filed with the SEC.  Each such statement is qualified in its entirety by such reference.
95
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of September 30, 2011 and 2010
F-3
Consolidated Statements of Operations for the years ended September 30, 2011 and 2010
F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended September 30, 2011 and 2010
F-5
Consolidated Statements of Cash Flows for the years ended September 30, 2011 and 2010
F-6
Notes to Consolidated Financial Statements
F-7
Consolidated Balance Sheets as of September 30, 2011 and June 30, 2012
F-25
Consolidated Statement of Operations for the nine months ended June 30, 2012 and 2011
F-26
Consolidated States of Cash Flows for the nine months ended June 30, 2012 and 2011
F-27
Notes to Unaudited Consolidated Financial Statements for the nine months ended June 30, 2012
F-28
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To The Audit Committee
Boomerang Systems, Inc.
Florham Park, New Jersey
We have audited the accompanying consolidated balance sheets
of Boomerang Systems, Inc. and Subsidiaries as of September 30, 2011 and 2010, 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, 2011.  The
Company's management is responsible for these consolidated 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 consolidated 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 consolidated financial statements. An audit also includes assessing   the accounting principles
used and significant estimates made by management, as well as evaluating the overall consolidated 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 Boomerang Systems, Inc. and Subsidiaries as of September
30, 2011 and 2010, and the results of its operations and cash flows for each of the years in the two year period ended September
30, 2011, in conformity with accounting principles generally accepted in the United States of America.
/s/ Liebman Goldberg & Hymowitz, LLP
Liebman Goldberg & Hymowitz, LLP
Garden City, New York
January 9, 2012
F-
2
BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
September 30,
2011
2010
ASSETS
Current assets:
Cash and cash equivalents
$
65,590
$
4,284,362
Accounts receivable
411,336
235,605
Note receivable
-
8,710
Inventory
202,189
265,761
Prepaid expenses and other assets
37,993
40,882
Costs in excess of billings
521,213
-
Total current assets
1,238,321
4,835,320
Property, plant and equipment, net
2,874,678
1,295,388
Other assets:
Note receivable
16,748
15,835
Investment
139,836
45,460
Total other assets
156,584
61,295
Total assets
$
4,269,583
$
6,192,003
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
1,635,353
$
1,412,081
Due to related party
-
70,867
Deposit payable
154,403
219,403
Billings in excesss of costs and estimated earned profits on uncompleted contracts
-
48,186
Estimated loss on uncompleted contract
188,484
-
Debt- current portion
110,780
506,908
Debt- current portion - related party
-
546,000
Total current liabilities
2,089,020
2,803,445
Long term liabilities:
Debt- long term
2,807,869
38,111
Debt- long term - related party
3,425,334
Total long term liabilities
6,233,203
38,111
Total liabilities
8,322,223
2,841,556
Stockholders' (deficit) equity:
Preferred stock, $0.01 par value; authorized shares 1,000,000; 0 shares issued and outstanding
-
-
Common stock, $0.001 par value; authorized shares 400,000,000 and 200,000,000; 7,277,192 and 7,021,404 issued and outstanding
7,277
7,021
Additional paid in capital
48,752,581
37,053,920
Accumulated (deficit)
(52,812,498
)
(33,710,494
)
Total stockholders' (deficit) equity
(4,052,640
)
3,350,447
Total liabilities and stockholders' (deficit) equity
$
4,269,583
$
6,192,003
Note: Common Stock
and Additional paid in capital at September 30, 2010 have been presented to reflect the effect of the one-for-twenty reverse stock
split of the Company's common stock effected on June 20, 2011.
See accompanying notes.
F-
3
BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER
30, 2011 and 2010
2011
2010
Revenues:
System sales
$
1,591,948
$
718,530
Total revenues
1,591,948
718,530
Cost of Goods Sold
3,241,531
715,135
Gross (Loss) Profit
(1,649,583
)
3,395
Expenses:
Sales and marketing
2,176,724
1,144,513
General and administrative
9,003,046
11,652,419
Research and development
2,202,020
2,669,331
Depreciation and amortization
52,006
49,089
Total expenses
13,433,796
15,515,352
Loss from operations
(15,083,379
)
(15,511,957
)
Other income (expenses):
Interest income
1,796
5,977
Interest expense
(113,657
)
(168,408
)
Financing costs
(3,899,866
)
-
Miscellaneous Income
173,163
-
Loss on disposal of equipment
(1,893
)
-
Loss on equity investment
(153,019
)
(108,785
)
Total other income (expenses)
(3,993,476
)
(271,216
)
Loss before provision for income taxes
(19,076,855
)
(15,783,173
)
Provision for income taxes
25,149
6,386
Net loss
$
(19,102,004
)
$
(15,789,559
)
Net loss per common share - basic and diluted
$
(2.68
)
$
(3.18
)
Weighted average number of shares - basic and diluted
7,117,078
4,960,954
Note:  The
weighted average number of shares, basic and diluted, for the twelve months ended September 30, 2010 have been presented to
reflect the effect of the one-for-twenty reverse stock split of the Company's common stock effected on June 20, 2011.
See accompanying notes.
F-
4
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 as of September 30, 2009
3,059,681
$
3,060
-
$
-
$
14,731,868
(17,920,935
)
(3,186,007
)
Options for Services
503,817
503,817
Convert the August 2008 12% Promissory Notes to Common Stock
839,003
839
1,677,199
1,678,038
Issuance of Common Stock- Private Placement
695,288
695
1,389,880
1,390,575
Issuance of October & November 2009 Post-Maturity Warrants
100,619
100,619
Issuance of Options- Directors
5,609,974
5,609,974
Issuance of Warrants- Directors
901,316
901,316
Issuance of Common Stock- Convertible Note
231,827
232
463,422
463,654
Issuance of Common Stock- March 2010 Private Placement
60,000
60
299,940
300,000
Issuance of Common Stock- April 2010 Private Placement
20,000
20
99,980
100,000
Issuance of Common Stock- June 2010 Private Placement
60,000
60
299,940
300,000
Issuance of Common Stock- Compensation for Officer
140,000
140
699,860
700,000
Issuance of Warrants- Officer
699,998
699,998
Issuance of Common Stock- Conversion of Debt
465,605
465
2,327,557
2,328,022
Issuance of Common Stock- July 2010 Private Placement
1,400,000
1,400
6,998,600
7,000,000
Issuance of Common Stock- Patterson Investment
50,000
50
249,950
250,000
Net loss
(15,789,559
)
(15,789,559
)
Balance as of September 30, 2010
7,021,404
$
7,021
-
$
-
$
37,053,920
$
(33,710,494
)
$
3,350,447
Options for Services
723,637
723,637
Issuance of Options - Officers
1,249,997
1,249,997
Issuance of Warrants - Consultant
25,000
25,000
Issuance of Warrants - Officer
4,202,406
4,202,406
Issuance of Warrants - Line of Credit
974,985
974,985
Issuance of Warrants - Line of Credit Draw
2,924,881
2,924,881
Issuance of Common Stock - Conversion of Debt
79,602
80
397,932
398,012
Issuance of Common Stock - November 2010 Private Placement
33,329
33
199,966
199,999
Issuance of Common Stock - February 2011 Private Placement
142,857
143
999,857
1,000,000
Net Loss
(19,102,004
)
(19,102,004
)
Balance as of September 30, 2011
7,277,192
$
7,277
-
$
-
$
48,752,581
(52,812,498
)
(4,052,640
)
Note: The Stockholder's
Equity (Deficit) Statement has been presented to reflect the effect of the one-for-twenty reverse stock split of the Company's
common stock effected on June 20, 2011.
See accompanying notes.
F-
5
BOOMERANG SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER
30, 2011 AND 2010
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(19,102,004
)
$
(15,789,559
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
52,006
49,089
Loss on disposal of equipment
1,893
-
Grant of options for services
1,973,634
6,113,790
Issuance of common stock for services
-
700,000
Issuance of warrants for services
4,227,406
1,601,314
Issuance of warrants for financing
3,899,866
-
Loss on equity investment
153,019
108,785
Post-Maturity Warrants
-
100,619
Changes in assets and liabilities:
(Increase) in accounts receivable
(175,731
)
(198,605
)
(Increase)/ decrease in notes receivable
8,710
(8,710
)
(Increase) in notes receivable (non-current)
(913
)
-
(Increase) in costs in excess of billings
(521,213
)
-
(Increase)/decrease in inventories
63,572
(84,871
)
(Increase)/decrease in prepaid expenses and other assets
2,889
(13,977
)
Increase in accounts payable and accrued liabilities
223,273
1,025,860
Increase in due to related party
283,466
274,298
Increase/ (decrease) in deposit payable
(65,000
)
200,000
Increase/ (decrease) in billings in excess of costs and estimated earned profits on uncompleted contracts
(48,186
)
48,186
Increase in estimated loss on uncompleted contract
188,484
-
NET CASH USED IN OPERATING ACTIVITIES
(8,834,829
)
(5,873,781
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(1,633,189
)
(1,081,225
)
Additional equity investment
(247,395
)
(133,825
)
NET CASH USED IN INVESTING ACTIVITIES
(1,880,584
)
(1,215,050
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable
5,725,000
2,120,859
Repayment of loans payable
(428,358
)
(1,120,402
)
Proceeds from private placement- common stock
1,199,999
9,340,576
NET CASH PROVIDED BY FINANCING ACTIVITIES
6,496,641
10,341,033
DECREASE IN CASH AND CASH EQUIVALENTS
(4,218,772
)
3,252,202
CASH AND CASH EQUIVALENTS - beginning of period
4,284,362
1,032,160
CASH AND CASH EQUIVALENTS- end of period
$
65,590
$
4,284,362
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
Cash paid for:
Interest
$
12,523
$
14,034
Income taxes
$
25,149
$
6,386
Non-cash investing and financing activites:
Conversion of promissory notes and accrued interest into common stock
$
-
$
2,141,692
Conversion of debt and accrued interest into common stock
$
398,012
$
2,328,023
See accompanying notes.
F-
6
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 1 – ORGANIZATION
AND NATURE OF OPERATIONS
The
Company
The Company, through its
wholly owned subsidiary, Boomerang Utah, is engaged in the design, development, and marketing of automated storage and retrieval
systems for automobile parking and containerized self-storage units. The Company was a developmental stage company through the
first quarter of fiscal 2008.
Unless the context otherwise
requires, the terms "Company," "we," "our," and "us," means Boomerang Systems,
Inc. and its consolidated subsidiaries.
On June 20, 2011, an amendment
to the Company's Certificate of Incorporation was filed, effecting a one-for-twenty reverse split (the "Reverse Split")
of Boomerang's common stock.  The par value of the Company's common stock remained $0.001 per share and the
number of shares of common stock authorized to be issued remained at 400,000,000.
All share numbers in the
financial statements give effect to the Reverse Split.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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.
Research and Development
Pursuant to ASC 730, research
and development costs are expensed as incurred.  Research and development costs for the years ended September 30, 2011
and 2010 were $2,202,020 and $2,669,331, respectively.
Earnings Per Common Share
We adopted ASC 260. 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 years ended September 30, 2011 and September 30, 2010 was 7,117,078 and 4,960,954, respectively.  The Company's
common stock equivalents, of outstanding options and warrants, have not been included as to include them would be anti-dilutive.
As of September 30, 2011 and 2010, there were fully vested options outstanding for the purchase of 597,165 and 361,884 common shares
and warrants for the purchase of 4,196,184 and 2,458,232 common shares, respectively, both of which could potentially dilute future
earnings per share.
Revenue Recognition
Revenues from the sales
of  RoboticValet™ and rack and rail systems will be recognized using the percentage of completion method, whereby
revenue and the related gross profit is determined by comparing the actual costs incurred to date for the project to the total
estimated project costs at completion.
F-
7
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Project costs generally
include all material and shipping costs, our direct labor, subcontractor costs and an allocation of indirect costs related to the
direct labor. Changes in the project scope, site conditions, staff performance and delays or problems with the equipment used on
the project can result in increased costs that may not be billable or accepted by the customer and a loss or lower profit from
what was originally anticipated at the time of the proposal.
Estimates for the costs
to complete the project are periodically updated by management during the performance of the project. Provisions for changes in
estimated costs and losses, if any, on uncompleted projects are made in the period in which such losses are determined.
When the current estimate
of total contract costs exceeds the current estimate of total contract revenues, a provision for the entire loss on the contract
is made.  Losses are recognized in the period in which they become evident under the percentage-of-completion method. 
The loss is computed on the basis of the total estimated costs to complete the contract, including the contract costs incurred
to date plus the estimated costs to complete.  As of September 30, 2011, it was estimated that the gross loss on current contracts
would be $1,772,262.  This loss is comprised of $1,583,778 recognized through the percentage of completion method for
the year ended September 30, 2011, and $188,484 as a provision for the remaining losses on contracts.  In addition, the
$3,395 of gross profit recognized at September 30, 2010 was reversed out during the year ended September 30, 2011.
Revenues of $1,591,948 and
$718,530 have been recognized for the years ended September 30, 2011 and 2010, respectively, under the percentage of completion
method.
The Company may have service
contracts in the future after the contract warranty period is expired, which are separate and distinct agreements from project
agreements and will be billed according to the terms of the contract.
Cash and 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.
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, 2011 and
2010, respectively.
Investment at Equity
The Company accounts for
the equity investment using the equity method unless its value has been determined to be other than temporarily impaired, in which
case we write the investment down to its impaired value. The Company reviews this investment periodically for impairment and makes
appropriate reductions in carrying value when other-than-temporary decline is evident; however, for non-marketable equity securities,
the impairment analysis requires significant judgment. During its review, the Company evaluates the financial condition of the
issuer, market conditions, and other factors providing an indication of the fair value of the investment. Adverse changes in market
conditions or operating results of the issuer that differ from expectation could result in additional other-than-temporary losses
in future periods.  See Note 4.
F-
8
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 fifteen
years. Depreciation and amortization for the years ended September 30, 2011 and September 30, 2010 was $52,006 and $49,089, respectively.
Income Taxes
We account for income taxes
under ASC 740-10. 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 the 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.
F-
9
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Warranty Reserves
The Company provides warranty
coverage on its products for a specified time as stipulated in its sales contracts.  At the time of completion of a project
the Company will record a warranty reserve for estimated costs in connection with future warranty claims.  The amount of warranty
reserve is based primarily on the estimated number of products under warranty and historical costs to service warranty claims. 
Management periodically assesses the adequacy of the reserves based on these factors and adjusts the reserve accordingly. 
The Company has incurred warranty expense of $0 and $8,162 in fiscal years 2011 and 2010, respectively, relating to its completed
projects.
Advertising Expense
Advertising costs amounted
to $242,717 and $190,326 for the years ended September 30, 2011 and 2010
,
respectively, and are included in Sales and Marketing.
Advertising costs are expensed as incurred.
Stock-Based Compensation
The analysis and computation
was performed based on our adoption of ASC 718-10-25, which requires the recognition of the fair value of stock-based compensation.  For
the fiscal years ended September 30, 2011 and 2010, we conducted an outside independent analysis and our own review, and based
on the results, we recognized $723,637 and $487,616 in share-based payments related to non-vested stock options that were issued
from fiscal year 2008 through 2010, and $1,249,997 and $5,626,174 for fully vested options issued during the year ended September
30, 2011 and 2010, respectively.  We also recognized $8,127,272 and $1,601,314 for the issuance of warrants, of which
$4,202,406 and $699,998 was for warrants issued to the Chief Executive Officer of the Company in connection with his employment
agreement, $25,000 and $0 issued to a consultant for services and $3,899,866 and $0 issued related to financing costs during the
year ended September 30, 2011 and 2010, respectively.
Reclassification
Certain fiscal year ended
September 30, 2010 items have been reclassified to conform with the fiscal year ended September 30, 2011 presentation.
Recent Accounting Pronouncements
In May 2011, the FASB issued
ASU No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs."  The
amendments in this ASU are effective during interim and annual periods beginning after December 15, 2011.  The adoption
of this ASU is not expected to have a material impact on the consolidated financial statements.
In June 2011, the FASB issued
ASU No. 2011-05, "Presentation of Comprehensive Income." Under the amendments in this ASU, an entity has two options
for presenting its total comprehensive income: to present total comprehensive income and its components along with the components
of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required
to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December
15, 2011, with early adoption permitted. The adoption of ASU No. 2011-05 will not have any material impact on the Company's
consolidated financial position and results of operations.
F-
10
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In September 2011, the FASB
issued Accounting Standards Update ("ASU") No. 2011-08, Intangibles — Goodwill and Other (Topic 350). This Accounting
Standards Update amends FASB ASC Topic 350. This amendment specifies the change in method for determining the potential impairment
of goodwill. It includes examples of circumstances and events that the entity should consider in evaluating whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption does not have
any material impact on the Company's consolidated financial position and results of operations.
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 the consolidated financial statements of the Company.
NOTE 3 - NOTE RECEIVABLE
On January 6, 2010, the
Company converted a $26,000 accounts receivable balance from a customer into a note receivable bearing interest at an annual rate
of 6%.  Monthly payments of $2,167 plus interest started February 1, 2010.  The amount outstanding at September
30, 2010 was $8,710.  This receivable was paid in full as of January 2011.
NOTE 4 – INVESTMENT
AT EQUITY
The Company made an initial
capital investment of $20,420 in the United Arab Emirates "UAE" joint venture, Boomerang Systems Middle East, LLC in
fiscal year 2009.  This investment was part of the application process to obtain 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.  The equity
method is used to calculate the current amount of this investment.
During the fiscal year
ended September 30, 2011, the Company made additional investments in the UAE joint venture of $247,395.  Based on the
equity method, the 49% loss we have recognized on this investment for the year ended September 30, 2011 was $153,019.  After
factoring in the loss, our carrying value on this investment was $139,836 at September 30, 2011.
Balance as of September 30, 2009
$
20,420
Additional investment
133,825
Loss on investment (40%)
(108,785
)
Balance as of September 30, 2010
$
45,460
Additional investment
247,395
Loss on investment (49%)
$
(153,019
)
Balance as of September 30, 2011
$
139,836
NOTE 5 – INVENTORY
The components of inventory
as of September 30, 2011 and 2010 were:
2011
2010
Parts, materials and assemblies
$
202,189
$
265,761
Total Inventory
$
202,189
$
265,761
F-
11
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 6 – PROPERTY,
PLANT 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. 
Depreciation and amortization for the years ended September 30, 2011 and 2010 were $52,006 and $49,089, respectively.
Property, plant and equipment
consist of the following at September 30, 2011 and 2010:
2011
2010
Computer equipment
$
242,149
$
138,823
Machinery and equipment
96,855
96,855
Furniture and fixtures
35,856
34,720
Leasehold improvements
62,469
62,469
Construction in progress (1)
2,595,765
1,072,668
$
3,033,094
$
1,405,535
Less: Accumulated depreciation
(158,416
)
(110,147
)
$
2,874,678
$
1,295,388
(1) All construction in
progress at September 30, 2011, was for the demonstration facility at Crystal Springs Resort which was completed in October 2011.
NOTE 7 – BILLINGS
IN EXCESS OF COSTS/COSTS IN EXCESS OF BILLINGS
The Company entered into
a contract in 2010 for the construction of a rack and rail-based parking system and is recognizing revenue on the percentage of
completion method.
Information with respect
to uncompleted contracts at September 30, 2011 and September 30, 2010 are as follows:
2011
2010
Earnings on work in progress
$
2,105,478
$
718,530
Less: Billings
1,584,265
766,716
Costs in excess of billings/(Billings in excess of costs)
$
521,213
$
(48,186
)
NOTE 8 – ACCOUNTS
PAYABLE AND ACCRUED EXPENSES:
Accounts payable and other
liabilities at September 30, 2011 and 2010 consist of the following:
2011
2010
Accounts payable – trade
$
1,340,114
$
889,724
Accrued interest
105,721
16,258
Accrued  taxes under employment agreement
-
315,000
Accrued payroll
122,715
99,714
Other accrued expenses
66,803
91,385
Total
$
1,635,353
$
1,412,081
F-
12
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 9 – INCOME
TAXES
The tax expense (benefit)
for the years ended September 30, 2011 and 2010 consists of the following components:
2011
2010
Current
$
-
$
-
Federal
$
-
$
-
State
25,149
6,386
25,149
6,386
Deferred
Federal
-
-
State
-
-
-
-
Total
$
25,149
$
6,386
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:
2011
2010
Federal corporate tax rate of 34% and applicable AMT applied to pretax loss
$
-
$
-
State and local taxes, net of federal benefit
25,149
6,386
Effect of non-deductible entertainment
-
-
Effect of tax vs. book depreciation
-
-
Effect of capital loss carry forward
-
-
Effect of NOL limitation
-
-
Total tax expense (benefit)
$
25,149
$
6,386
Deferred income taxes consist
of the following at September 30, 2011 and 2010:
2011
2010
Deferred tax assets
$
4,590,000
$
2,429,640
Deferred tax liabilities
-
-
Valuation allowance
(4,590,000
)
(2,429,640
)
Total
$
-
$
-
As of September 30, 2011, the Company had
net operating losses ("NOLs") of approximately $13,500,000 and for September 30, 2010, it had NOLs of approximately
$7,146,000.  These amounts are available to be carried forward to offset future taxable income. The carry forwards begin
to expire during the year ended September 30, 2027. The Company has provided a full 100% valuation allowance on the deferred tax
assets at September 30, 2011 and 2010 to reduce such deferred income tax assets to zero as it is 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 if warranted.
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. 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.
F-
13
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 10 –DEBT
The Company entered into
a sixty month equipment lease with a third party commencing in December 2007.  The total principal balance of this lease
was $135,675 at an annual rate of 6.45%.   At September 30, 2011, the outstanding principal balance was $38,111,
of which $30,242 was classified as current debt.  The remaining $7,869 was classified as long-term debt.
Effective February 6, 2008,
subsequent to the reverse merger, the Company was indebted for an unsecured loan to a third party.  As of September 30,
2010, 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 September 30, 2011, the balance of the loan including accrued interest was $88,971.
In November 2010, the Company
converted a third party loan of $398,012, including accrued interest, that was due to mature on December 31, 2010 and had an interest
rate of 12%, into 79,603 shares of the Company's common stock, $0.001 par value and an equal number of five-year warrants,
each to purchase a share of the Company's common stock with an exercise price of $5.00 per share.
Between December 23 and
December 29, 2010, the Company obtained commitments for a line of credit for an aggregate of $3,250,000 provided by nine accredited
investors, including four related parties in the amount of $1,750,000, pursuant to the terms of a commitment letter entered into
between these lenders and the Company.  Upon each draw down on the line of credit, each lender received a note for the
amount borrowed, bearing interest from the date of the borrowing thereunder at a rate of 3% per annum.  Under the terms
of the commitment letter, each lender received one five-year warrant to purchase one share of the Company's common stock
for every dollar that lender committed under the line of credit, with an exercise price of $6.00 per share.  In addition,
upon each draw down on the line of credit, each lender received additional warrants at a rate of three warrants for each dollar
drawn down from that lender's commitment, with the amount of the draw down attributable to each investor's commitment to
be determined on a pro rata basis.
In February and March 2011,
the Company drew down a total of $2,166,664 on this line of credit of $3,250,000.  In connection with the draw down,
the Company issued notes in an aggregate amount of $2,166,664, bearing interest of 3% per annum to a total of nine investors, including
$1,166,666 to four related parties.  In addition, in connection with the draw down, five-year warrants were issued to
purchase 325,000 shares of common stock at an exercise price of $6.00 per share, including a total of 175,000 warrants issued to
four related parties.  In May 2011, the Company drew down the remaining $1,083,336 on this line of credit.  In
connection with the draw down, the Company issued notes in an aggregate amount of $1,083,336, bearing interest of 3% per annum
to a total of nine investors, including $583,334 to four related parties.  In addition, in connection with the draw down,
five-year warrants were issued to purchase 162,500 shares of common stock at an exercise price of $6.00 per share, including a
total of 87,500 warrants issued to four related parties.
On June 30, 2011, the Company
entered into a bank line of credit for up to $1,000,000.  During the fiscal year ended September 30, 2011, the Company
drew down the entire balance of the line of credit.  This line of credit bore interest of 3.25% per annum and was due
on October 29, 2011.
On August 4, 2011, the
Company entered into a 5% bank Promissory Note a principal amount of $300,000.  The maturity date of this note was October
4, 2011.
F-
14
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 10 –DEBT (continued)
In May 2010, the Company
entered into a 6% line of credit with Sail Energy, a company owned by Gail Mulvihill, a principal shareholder of the Company and
the mother of the Company's President, Christopher Mulvihill, for up to $1,300,000.  In May 2011, the outstanding
principal balance was $273,000 and it was agreed between the Company and Sail Energy that there would be no additional borrowing
under this line of credit.  As of September 30, 2011, the outstanding principal balance of this loan was $273,000, which
was due on December 31, 2011.  The total amount outstanding under this loan, including accrued interest, as of September
30, 2011 was $300,142.  The loan was convertible into shares of the Company's common stock and warrants to purchase
shares of common stock at a conversion rate of $5.00 for one share of our common stock and one five-year warrant to purchase one
additional share with an exercise price of $5.00 per share.
In July 2010, the Company
entered into a 6% Convertible Promissory Note with Venturetek, LP, a principal stockholder of the Company, with a principal amount
of $273,000 which is due on December 31, 2011.  The total amount outstanding under this note, including accrued interest,
as of September 30, 2011 was $292,461.  The note, together with accrued but unpaid interest, was convertible into shares
of the Company's common stock and warrants to purchase shares of common stock at a rate of $5.00 for a unit consisting of
one share of our common stock and one five-year warrant to purchase one additional share at an exercise price of $5.00 per share.
On September 30, 2011, the
Company owed an aggregate of $220,763 to SB&G Properties for deferred rental payments.  This deferred rent was converted
to a long-term note on November 1, 2011.  See Note 12 – Related Parties.
On September 30, 2011, the
Company owed an aggregate of $133,571 to Stan Checketts Properties for deferred rental payments.  This deferred rent
was converted to a long-term note on November 1, 2011.  See Note 12 – Related Parties.
In September 2011, Atlantic
and Madison of NJ Corp, a company owned by Gail Mulvihill, loaned the Company $775,000, with the understanding that upon finalization
of the documents related to a private placement offering by the Company, these loans will be considered an investment in such private
placement.
Principal
As of
Current Debt- Third Party:
9/30/2011
9/30/2010
Maturity Date
Interest Rate
Secured
Loan Payable- Third Party
$
80,538
$
80,538
Upon Demand
10
%
No
Loan Payable- Third Party
-
398,012
12/31/2010
(1
)
12
%
No
Lease Payable- Bank (current portion)
30,242
28,358
9/30/2011
6.45
%
Yes
Total Current Debt- Third Party
$
110,780
$
506,908
Current Debt – Related Party
Loan Payable – Related Party
$
-
273,000
11/1/2016
(2
)
6
%
No
Loan Payable – Related Party
-
273,000
11/1/2016
(2
)
6
%
No
Total Current Debt – Related Party
$
-
$
546,000
Long-Term Debt – Third Party:
Promissory Notes – Line of Credit
1,500,000
-
11/1/2016
(2
)
6
%
No
Line of Credit - Bank
1,000,000
-
11/1/2016
(2
)
6
%
No
Promissory Note – Bank
300,000
-
11/1/2016
(2
)
6
%
No
Lease Payable- Bank
7,869
38,111
12/31/2012
6.45
%
Yes
Total Long-Term Debt – Third Party
$
2,807,869
$
38,111
Long-Term Debt- Related Party:
Loan Payable- Related Party
$
273,000
$
-
11/1/2016
(2
)
6
%
No
Loan Payable- Related Party
273,000
-
11/1/2016
(2
)
6
%
No
Loan Payable – Related Party
220,763
-
11/1/2016
(2
)
6
%
No
Loan Payable – Related Party
133,571
-
11/1/2016
(2
)
6
%
No
Loan Payable – Related Party
775,000
-
11/1/2016
(2
)
6
%
No
Promissory Notes – Line of Credit
1,750,000
-
11/1/2016
(2
)
6
%
No
Total Long-Term Debt- Related Party
$
3,425,334
$
-
(1)
This note was converted into common stock and warrants during the quarter ended 12/31/2010. See Note 8.
(2)
This debt was reclassified from current to long-term pursuant to ASC 470-10-45-14.  On November 1, 2011, as part of a private offering described in Note 15 – Subsequent Events, this debt was refinanced to a long-term note.
F-
15
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 10 –DEBT (continued)
Capital lease payable to bank*
2011
2010
Secured by equipment
$
38,111
$
66,469
Less: current maturities
(30,242
)
(28,358
)
Total long-term debt
$
7,869
$
38,111
*payable in monthly installments
of $2, 651 including interest at 6.448% due December 1, 2012
Aggregate maturities required
on long-term debt at September 30, 2011 is as follows:
Year Ended
September 30,
2012
30,242
2013
7,869
Subtotal
38,111
Less current
(30,242
)
Total long-term
$
7,869
NOTE 11 - EQUITY
Preferred Stock:
The Company is authorized
to issue 1,000,000 shares of preferred stock, with a par value of $0.01 per share.  As of September 30, 2011 and 2010,
there were no shares of preferred stock issued and outstanding.
Common Stock:
In September 2010, the Board
of Directors unanimously approved an amendment to the Company's Certificate of Incorporation, increasing the Company's
authorized shares of common stock from 200,000,000 to 400,000,000, which was approved by the written consent of the holders of
a majority of our issued and outstanding shares of common stock on September 29, 2010. The increase was affected by the filing
of an amendment to our certificate of incorporation with the Secretary of State of Delaware on November 23, 2010.
In November 2010, the holder
of $398,012 of outstanding indebtedness, exchanged its indebtedness for units consisting of shares of the Company's common
stock and common stock purchase warrants.  The exchange was for 79,602 shares of the Company's common stock and
an equal number of common stock purchase warrants to purchase shares of common stock, which are exercisable for a period of five
years at an exercise price of $5.00.  The exchange was at a rate of $5.00 for one share of common stock and one warrant.
In November 2010, the Company
sold 33,329 shares of common stock at $6.00 per share in a private placement for proceeds of approximately $200,000.  These
investors also received five year warrants to purchase 33,329 shares with an exercise price of $6.00 per share.
On February 11, 2011, the
Company sold 142,857 shares of common stock at $7.00 per share in a private placement for proceeds of $1,000,000.
On June 20, 2011, an amendment
to the Company's Certificate of Incorporation was filed, effecting a one-for-twenty reverse split of Boomerang's common
stock.  The par value of the Company's common stock will remain $0.001 per share and the number of shares of common
stock authorized to be issued will remain at 400,000,000.
F-
16
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 11 – EQUITY
(continued)
Options:
On October 6, 2010, the
Company granted ten-year non-qualified, fully vested options to the Company's President, Christopher Mulvihill, to purchase
200,000 shares of common stock exercisable at $5.00 per share.  The Company has valued and expensed these options at
$1,000,000 for the year ended September 30, 2011, based on the Black-Scholes Model.  The following weighted assumptions
were used for valuing these options: (i) risk free interest rate of 0.13%, (ii) expected life of 10 years (iii) dividend rate of
0.00% and (iv) expected volatility of 402.2%.
On November 24, 2010, the
Company granted options to the Company's then Chief Operating Officer, to purchase common stock comprised of five-year, non-qualified,
fully vested options to purchase 50,000 shares exercisable at $5.00 per share.  These options were forfeited in June
2011, three months after his employment ceased.  Since these options vested immediately, the Company has valued and expensed
these options at $249,997 for the year ended September 30, 2011, based on the Black-Scholes Model.  The following weighted
assumptions were used for valuing these options: (i) risk free interest rate of 0.13%, (ii) expected life of 5 years (iii) dividend
rate of 0.00% and (iv) expected volatility of 339.29%.
The Company recorded $1,249,997
and $6,113,789 of compensation expense, net of related tax effects, for the options that were granted that vested during the twelve
months ended September 30, 2011 and 2010, respectively, in accordance with ASC 718-10-25. As of September 30, 2011, there is approximately
$539,850 of total unrecognized costs related to unvested stock options granted to employees. These costs are expected to be recognized
over the next two fiscal years.
The volatility assumption
for the period 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. Although stock-based compensation expense, recognized in the accompanying consolidated statement of operations
for the twelve months ended September 30, 2011 and 2010, 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 the Company has no historical data
to use for estimating forfeitures.
The following table summarizes
option activity for the years ended September 30, 2011 and 2010:
Weighted Average
Options
Exercise Price
Outstanding as of September 30, 2009
125,385
$
11,60
Granted
316,000
$
2.00
Exercised
-
-
Forfeitures
-
-
Outstanding as of September 30, 2010
441,385
$
4.80
Granted
250,000
$
5.00
Exercised
-
-
Forfeitures
(50,000
)
(5.00
)
Outstanding as of September 30, 2011
641,385
$
4.82
F-
17
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 11 – EQUITY
(continued)
The following table summarizes
information about stock options outstanding and exercisable as of September 30, 2011 and 2010:
Period
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
9/30/2011
$
2.00-18.00
641,385
7.56
$
4.82
597,635
$
5.02
7.91
9/30/2010
$
2.00-18.00
441,385
7.88
$
4.80
361,885
$
5.20
8.80
Warrants:
On October 1, 2010, the
Company entered into an amended and restated employment agreement with our Chief Executive Officer, Mark Patterson.  The
amended agreement provides for a base salary of $200,000 per year and provides for a grant of an aggregate of 1,080,000 five-year
warrants with an exercise price of $5.00 per share that vest and become exercisable as follows: (i) 270,000 on October 1, 2010,
(ii) 210,000 on each of February 1, August 1, 2011 and February 1, 2012, and (iii) 180,000 on August 1, 2012.  The amended
agreement provides Mr. Patterson with a right of first refusal, pursuant to which Mr. Patterson has the right, but not the obligation,
to maintain his then pro rata share of the Company's issued and outstanding shares and warrants by purchasing additional
shares and warrants each time the Company offers shares and/or warrants for sale.  The Company has valued and expensed
a total of 690,000 vested warrants at $3,502,418 during the year ended September 30, 2011, based on the Black-Scholes Model.
On November 12, 2010, the
Company issued five-year warrants to our Chief Executive Officer, Mark Patterson, in connection with the amendment and termination
of his prior employment agreement, to purchase 280,000 shares of the Company's common stock at an exercise price of $5.00
per share.  These warrants were issued in conjunction with an amendment to the Executive employment agreement entered
into with Mr. Patterson in June 2010.  Using the Black-Scholes Model, the Company has valued these warrants at approximately
$1,399,985, of which $699,998 was expensed during the fiscal year ended September 30, 2010 and the remaining $699,987 was expensed
during the year ended September 30, 2011.
On November 30, 2010, the
Company granted options to a consultant to purchase up to 5,000 shares of the Company's common stock at an exercise price
of $5.00 per share.  These options vest immediately and shall expire after a period of 5 years.  The Company
has valued and expensed these warrants at approximately $25,000 during the year ended September 30, 2011, based on the Black-Scholes
Model.
Between December 23 and
December 29, 2010, the Company received commitments from nine accredited investors for a line of credit of up to $3,250,000, including
commitments of an aggregate of $1,750,000 by four related parties.  Each lender received one warrant to purchase one
share of the Company's common stock for each dollar that was committed.  Accordingly, the Company granted an aggregate
of 162,500 five year warrants at an exercise price of $6.00 per share to these lenders, 87,500 of which were issued to related
parties.  Using the Black-Scholes Model, the Company has valued and expensed these warrants at $974,985 during the year
ended September 30, 2011, of which $524,992 pertains to related parties.
In February and March 2011,
in connection with the line of credit draw, five-year warrants were issued to purchase 325,000 shares of common stock at an exercise
price of $6.00 per share, including a total of 175,000 warrants issued to four related parties.  Using the Black-Scholes
Model, the Company has valued and expensed these warrants at $1,949,942 during the year ended September 30, 2011, including $1,049,969
for warrants issued to the four related parties.
F-
18
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 11 – EQUITY (continued)
In May 2011, in connection
with a draw on the aforementioned line of credit, five-year warrants were issued to purchase 162,500 shares of common stock at
an exercise price of $6.00 per share, including a total of 87,500 warrants issued to four related parties.  Using the
Black-Scholes Model, the Company has valued and expensed these warrants at $974,939 during the year ended September 30, 2011, including
$524,967 for warrants issued to the four related parties.
When the above warrants
were granted, the fair value of each warrant granted was estimated on the date of grant using the Black-Scholes valuation model.  The
following weighted assumptions were used for these warrants granted during the fiscal year ended September 30, 2011: (i) risk free
interest rate of 0.199%, (ii) expected life of five years, (iii) dividend rate of 0.00% and (iv) expected volatility between 357.2
– 403.1%.
The following table summarizes
warrant activity for the years ended September 30, 2010 and 2009:
Weighted Average
Warrants
Exercise Price
Outstanding as of September 30, 2009
333,902
$
16.60
Granted
2,124,350
$
5.00
Exercised
-
-
Forfeitures
-
-
Outstanding as of September 30, 2010
2,458,252
$
6.60
Granted
1,737,932
$
5.95
Exercised
-
-
Forfeitures
-
-
Outstanding as of September 30, 2011
4,196,184
$
5.17
NOTE 12 – RELATED
PARTY TRANSACTIONS
HSK Funding, Inc., Lake
Isle Corp., and Venturetek, LP, are beneficial holders of shares of our Company's common stock 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 sole voting and investment control over Lake Isle Corp., is
the mother of Christopher Mulvihill, our President, and is a principal stockholder of our Company.  SB&G entered
into a lease with Boomerang Utah dated October 1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan,
Utah ("Building A").  The Company assumed this lease in February 2008.  The initial term of the
lease was for one year with an annual rent of $260,610 plus real property and school taxes. In addition, Boomerang is obligated
to pay for all utilities, repairs and maintenance to the property. The approximately 29,750 square foot leased premises are used
for Boomerang's manufacturing activities.  On March 15, 2010, Boomerang and SB&G agreed to maintain these terms
until September 30, 2011.  This lease has been extended on a month-to-month basis.  Deferred rental payments
totaling $220,763 have been accrued as of September 30, 2011 and classified as long-term debt – related party on our balance
sheet.  On November 1, 2011, this liability was refinanced as part of the private placement offering described in Note
15 – Subsequent Events.
Stan Checketts Properties
("SCP"), a company owned by the chief executive officer of Boomerang's wholly owned subsidiary, Boomerang Sub,
Inc., entered into a lease with Boomerang Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan,
Utah.  The Company assumed this lease in February 2008.  The initial term of the lease was for one year at
a fixed annual rent of $157,680 plus real property and school taxes. In addition, Boomerang is obligated to pay for all utilities
and for repairs and maintenance to the property.  The approximately 18,000 square foot leased premises are, in addition
to Building A, also used for Boomerang's manufacturing activities.  We are currently leasing an additional
2,400 square feet of office and conference room space with Stan Checketts Properties.  On March 15, 2010, Boomerang and
SCP agreed to maintain these terms until September 30, 2011.  An amendment was entered into on October 1, 2011, extending
this lease on a month to month basis.  Deferred rental payments totaling $133,571 have been accrued as of September 30,
2011 and classified as long-term debt – related party on our balance sheet.  On November 1, 2011, this liability
was refinanced as part of the private placement offering described in Note 15 – Subsequent Events.
F-
19
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 12 – RELATED
PARTY TRANSACTIONS (continued)
SB&G is obligated on
a twenty-year promissory note due August 1, 2027 owing to a non-affiliated bank. The principal amount due was $773,913 as
of September 30, 2011, and the note bears interest at 3.807% per annum. The promissory note is collateralized by the real property
that is the subject of the lease from SB&G to Boomerang Utah. Boomerang and Messrs. Gene Mulvihill, Stan Checketts, and Burton
Koffman ("Koffman") are the joint and several guarantors of this promissory note.  Gene Mulvihill is the
husband of Gail Mulvihill and the father of Christopher Mulvihill, the President of the Company.
Messrs. Gene 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.
The Company used the services
of Coordinate Services, Inc. for product development.  The owner of this company is Gene Mulvihill, Jr. who is the brother
of Christopher Mulvihill, our President, and the son of Gail Mulvihill.  The amount of this expense for the twelve months
ended September 30, 2011 and 2010 was $158,879 and $128,959 respectively; which is recorded under Research and Development expenses.
The Company reimbursed North
Jersey Management Services, Inc. for payroll related expenses for the services of Joseph Bellantoni, the Company's Chief
Financial Officer, and Maureen Cowell, the Company's Corporate Secretary.  Mr. Bellantoni is also the President
and Mrs. Cowell is the Vice President of North Jersey Management Services, Inc.  The amount of this expense for the twelve
months ended September 30, 2011 and 2010 was $78,000 and $49,500 respectively; which is recorded under General and Administrative
expenses.
In April 2010, we entered
into a twenty-year ground lease with Route 94 Development Corporation ("Route 94") to lease a portion of an approximately
fifteen acre parcel in the town of Hamburg, located in Hardyston Township, New Jersey, on which we intend to construct a RoboticValet™
parking facility.  The leased property is adjacent to Grand Cascades Lodge ("Cascades"), a hotel within the Crystal
Springs Golf and Spa Resort ("the Resort"). The parking facility is being constructed by Crystal Springs Builders,
LLC ("Builders").   It is intended that this facility will be used by us primarily for demonstration and
marketing purposes in the eastern portion of the United States.  In consideration of the benefits to us under the terms of
the lease, we agree to provide to the lessor and its affiliates parking and storage space within the facility at no cost to the
lessor and its affiliates subject to our right to use the facility for demonstration purposes.  In addition, we are required
to pay the operating costs, premiums on the insurance required under the terms of the lease and incremental property taxes resulting
from our construction of the facility.  For a period of 60 months, commencing five years after execution of the lease, the
lessor has the option to purchase the facility from us and we have a right to cause the lessor to buy from us the facility we construct. 
The price to be paid by the lessor upon exercise of its option to purchase the facility is 110% of the greater of (i) the depreciated
value of the facility, or (ii) the fair market value of the facility, and the price to be paid by the lessor upon exercise of our
right to cause the lessor to buy the facility is $1.00.
The Resort owns and operates
seven golf courses, two hotels and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more
than 40 additional entities, including the above named entities.  Gail Mulvihill owns 50% of each of Builders, Cascades
and Route 94 and, indirectly, through these and various other entities, Gail Mulvihill and her family own approximately 50% of
the Resort.  Except as set forth above, no other officer, director or 5% or greater stockholder of the company has any
equity interest in Builders, Cascades or Route 94.  The Company made payments of approximately $980,000 and $375,500
to Crystal Springs Builders, LLC, ("Builders") and approximately $39,000  and $15,000to Grand Cascades Lodge
at Crystal Springs, LLC ("Cascades") in the fiscal years ended September 30, 2011 and 2010, respectively.  No
payment was made to Route 94 in the fiscal years ended 2011 and 2010.
F-
20
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 12 – RELATED
PARTY TRANSACTIONS (continued)
On May 14, 2010, the Company
entered into a 6% convertible line of credit for up to $1,300,000 with Sail Energy, a company owned by Gail Mulvihill, who has
sole voting and investment control.  In May 2011, it was agreed between the Company and Sail Energy that there would
be no additional borrowing under this line of credit.  The amount outstanding on this loan, including accrued interest,
as of September 30, 2011 is $300,142.
In July 2010, Venturetek,
LP, a principal stockholder of the Company, entered into a 6% convertible promissory note with the Company for $273,000.  The
amount outstanding on this note, including accrued interest, as of September 30, 2011 is $292,461.
In February and March 2011,
the Company drew down a total of $2,166,664 on its line of credit of $3,250,000.  In connection with the draw down, the
Company issued notes in an aggregate amount of $1,166,666 to four related parties.  In addition, in connection with the
draw down, five-year warrants were issued to these related parties to purchase a total of 175,000 shares of common stock at an
exercise price of $6.00 per share.
In May 2011, the Company
drew down the remaining $1,083,336 on the aforementioned line of credit of $3,250,000.  In connection with the draw down,
the Company issued notes in an aggregate amount of $583,334 to four related parties.  In addition, in connection with
the draw down, five-year warrants were issued to these related parties to purchase a total of 87,500 shares of common stock at
an exercise price of $6.00 per share.
In September 2011, Atlantic
and Madison of NJ Corp, a company owned by Gail Mulvihill, loaned the Company $775,000, with the understanding that upon finalization
of the documents related to a private placement offering by the Company, these loans will be considered an investment in such private
placement.
Our management believes
that the terms of the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons
at the time and under the circumstances as when the transactions were entered into.
NOTE 13 – COMMITMENTS
AND CONTINGENCIES
Boomerang Utah is a joint
and several guarantor on a twenty-year promissory note owing to a non-affiliated bank in the principal amount of $773,913, 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.  Messrs. Gene Mulvihill, Checketts, and Koffman, are the other
joint and several guarantors of the promissory note.
Our principal office, consisting
of approximately 2,022 square feet, located at 355 Madison Avenue, Morristown, NJ was under a five year lease with NYC Skyline
Realty, LLC, a non-affiliated entity.  During the year ended September 30, 2011, we gave notice to terminate this lease
effective December 31, 2011.  We entered into a five year lease, commencing on December 1, 2011, on a new principal office,
consisting of approximately 7,350 square feet, located at 30 B Vreeland Avenue, Florham Park, NJ.   This is also the
location of our sales and marketing activities.
F-
21
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 13 – COMMITMENTS
AND CONTINGENCIES (continued)
The aggregate future minimum
annual rental payments, exclusive of escalation payments for taxes and operating costs, under operating leases are as follows:
Year ended September 30, 2012
$
87,129
September 30, 2013
127,706
September 30, 2014
133,219
September 30, 2015
138,731
September 30, 2016
144,244
Total
$
631,029
NOTE 14 – CONCENTRATION
OF RISK
Financial instruments, which
potentially expose the Company to concentrations of risk, consist primarily of cash and trade accounts receivable.  At
September 30, 2011, our cash balances did not exceed federally insured limits, but at September 30, 2010 the cash balances in our
accounts exceeded federally insured limits by approximately $3,721,280.  The Company 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 1, 2011, the Company entered into an amendment with Stan Checketts Properties, to extend, on a month-to-month basis,
its lease on the approximately 20,400 square feet of manufacturing and office space in Logan, Utah.  See Note 12.
In October 2011, we entered
into a five year lease, commencing on December 1, 2011, on a new principal office, consisting of approximately 7,350 square feet,
located at 30 B Vreeland Avenue, Florham Park, NJ. This is also the location of our sales and marketing activities.
In October 2011, Atlantic
and Madison of NJ Corp loaned the Company $676,000.  On November 1, 2011, this outstanding debt was refinanced as part
of the private placement offering described below.
On October 28, 2011, Atlantic
and Madison of NJ Corp caused the $300,000 bank note to be paid in full.  See Note 10 – Debt.  Accordingly,
the Company became indebted to Atlantic and Madison of NJ Corp for $300,000.  This note is included in the $676,000 of
loans described above.
On October 28, 2011, Atlantic
and Madison of NJ Corp transferred title of an aggregate of $1,451,000 principal amount of debt owed to it by the Company to Christopher
Mulvihill.  The debt outstanding under these notes was refinanced on November 1, 2011, as part of the private placement
offering described below.
On October 28, 2011, Lake
Isle Corp, caused the $1,000,000 bank line of credit to be paid in full.  See Note 10 – Debt.  Accordingly,
the Company became indebted to Lake Isle Corp for $1,000,000, and this debt was refinanced on November 1, 2011, as part of the
private placement offering described below.
On October 28, 2011, the Company entered into an employment agreement
with David K. Koch, its Chief Operating Officer, with an effective date of August 1, 2011.
On November 1, 2011, Mark
Patterson, our Chief Executive Officer, loaned us $100,000.  The debt outstanding under this loan was refinanced on November
18, 2011, as part of the private placement offering described below.
Private Placement Offering
On November 1, 2011, the
Company issued to subscribers ("Subscribers") 6% convertible promissory notes ("Notes") in the aggregate
principal amount of approximately $9.4 million and warrants ("Warrants" and collectively with the Notes, the "Securities")
to purchase approximately 2.2 million shares of Common Stock of the Company in the first of three (3) closings of a private placement
(the "Offering") for which the Company received cash proceeds of approximately $2.7 million and refinanced approximately
$6.7 million of then existing short-term indebtedness. For each $100,000 invested, a Subscriber was issued a $100,000 principal
amount Note and Warrants to purchase 23,530 shares of the Company's Common Stock.
F-
22
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 15 – SUBSEQUENT
EVENTS (continued)
As part of the Offering,
on November 18, 2011, we issued to Subscribers Notes in the aggregate principal amount of approximately $1.35 million and Warrants
to purchase approximately 318,000 shares of Common Stock for which the Company received cash proceeds of approximately $1.25 million
and refinanced approximately $100,000 of indebtedness.
As part of the Offering,
on December 9, 2011, we issued to Subscribers Notes in the aggregate principal amount of approximately $925,000 and Warrants to
purchase approximately 218,000 shares of Common Stock, of which the Company received cash proceeds of approximately $925,000.
The Notes are due five years
after the respective date of issuance and are convertible into Common Stock at $4.25 per share (the "Conversion Price"),
subject to weighted average adjustment for issuances of common stock or common stock equivalents below the Conversion Price, subject
to certain exceptions.
Interest accrues on the
Notes at 6% per annum. Interest is payable quarterly, commencing on December 31, 2011, at the Company's option, interest
may be payable in: (i) cash or (ii) shares of the Common Stock. If the Company elects to pay interest in shares of its Common Stock
on an interest payment date, the number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued
and unpaid interest payable on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the
last sale price of the Common Stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately
preceding such interest payment date (the "Average Price"), if the average daily trading volume (the "ADTV")
of the Common Stock for the ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however
if the ADTV is equal to or greater than $100,000, it will be the Average Price, and not the Conversion Price.
The outstanding principal
amount of the Notes and accrued and unpaid interest thereon will automatically convert into a number of shares of Common Stock
determined by dividing the outstanding principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion
Price in effect on the
mandatory conversion date.
The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30 immediately preceding
trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of the Notes are eligible
for resale under an effective registration statement and/or Rule 144 promulgated under the Securities Act of 1933, as amended,
without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading day period equals or exceeds $500,000.
If an event of default as
defined in the Notes exists, the holder may declare the entire principal of, and all interest accrued and unpaid on, the Note then
outstanding to be, due and payable.
The Warrants are exercisable
for a period of five years from the respective date of issuance at $4.25 per share, subject to weighted average adjustment for
issuance below the exercise price, subject to certain exceptions.  Cashless exercise is permitted if the average trading
volume of the Company's Common Stock during at least five (5) of the ten (10) consecutive trading days immediately preceding
the date of the notice of exercise is at least 10,000 shares, and will be based upon the average of the last sale price of the
Common Stock during the five (5) consecutive trading days prior to the notice of exercise. In certain instances, a holder shall
not be permitted to exercise the Warrant if such exercise would result in such holder's total ownership of the Company's
Common Stock exceeding 4.9%.
F-
23
BOOMERANG
SYSTEMS INC., AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010
NOTE 15 – SUBSEQUENT
EVENTS (continued)
In connection with the Offering,
the Company paid Gilford Securities Incorporated, as placement agent, a cash fee of approximately $243,989 for its services as
placement agent. The Company issued to the placement agent warrants (the "Placement Agent Warrants") to purchase 109,177
shares of Common Stock. The Placement Agent Warrants expire five years from the respective date of issuance and contain substantially
the same terms as those issued to Subscribers.
The Company also entered
into a registration rights agreement with the Subscribers. Pursuant to the registration rights agreement, the Company agreed to
file a registration statement within 90 days after the closing date of the Offering (the "Closing Date") to register
for resale the shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants and Placement Agent Warrants
(collectively, the "Registrable Shares"). In the event that the SEC limits the number of Registrable Shares that may
be included in the registration statement, the Company shall include only those Registrable Shares permitted by the SEC and shall
file additional registration statements at the earliest practical date as the Company is permitted to do so in accordance with
SEC guidelines. The Company shall use its best efforts to cause (i) the Registration Statement to be effective within 150 days
of the Closing Date, and (ii) any additional registration statements to be declared effective within 90 days of the required filing
date.
In the event that a registration
statement is not filed or declared effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable
Shares an amount equal to 1% of the original principal amount of the investor's Note, multiplied by a fraction with the numerator
equal to the number of Registrable Shares that were required to be included in the Registration Statement which is not so filed,
declared effective or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the
total number of shares issued or issuable to the Investor upon conversion of the Notes and exercise of the Warrants purchased pursuant
to the Subscription Agreement and owned by such holder.
F-
24
BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
September 30,
2012
2011
ASSETS
Current assets:
Cash and cash equivalents
$
3,261,098
$
65,590
Restricted cash
593,228
-
Accounts receivable
225,360
411,336
Inventory
284,219
202,189
Prepaid expenses and other assets
59,885
37,993
Costs in excess of billings
316,911
521,213
Total current assets
4,740,701
1,238,321
Property, plant and equipment, net
2,788,481
2,874,678
Other assets:
Note receivable
-
16,748
Security deposit
20,825
-
Investment at equity
221,010
139,836
Total other assets
241,835
156,584
Total assets
$
7,771,017
$
4,269,583
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities
$
1,436,813
$
1,635,353
Due to related party
132,457
-
Deposit payable
99,403
154,403
Billings in excesss of costs and estimated earned profits on uncompleted contracts
514,408
-
Estimated loss on uncompleted contract
632,115
188,484
Debt- current portion
96,151
110,780
Total current liabilities
2,911,347
2,089,020
Long term liabilities:
Debt- long term, net of discount
2,668,533
2,807,869
Debt- long term- related party, net of discount
1,590,083
3,425,334
Derivative liability
13,411,740
-
Total long term liabilities
17,670,356
6,233,203
Total liabilities
20,581,703
8,322,223
Stockholders' deficit:
Preferred stock, $0.01 par value; authorized shares 1,000,000;
0 shares issued and outstanding
-
-
Common stock, $0.001 par value; authorized shares 400,000,000 and 400,000,000;
7,399,086 and 7,277,192 issued and outstanding
7,399
7,277
Additional paid in capital
53,373,148
48,752,581
Accumulated deficit
(66,191,233
)
(52,812,498
)
Total stockholders' deficit
(12,810,686
)
(4,052,640
)
Total liabilities and stockholders' deficit
$
7,771,017
$
4,269,583
See accompanying notes.
F-
25
BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended June 30,
Three Months Ended June 30,
2012
2011
2012
2011
Revenues:
System sales
$
477,290
$
1,319,620
$
96,512
$
-
Total revenues
477,290
1,319,620
96,512
-
Cost of goods sold
2,069,846
2,496,467
1,345,313
473,934
Gross loss
(1,592,556
)
(1,176,847
)
(1,248,801
)
(473,934
)
Expenses:
Sales and marketing
877,831
1,891,800
271,067
298,860
General and administrative expenses
5,165,169
6,842,084
1,598,414
1,060,401
Research and development
1,033,435
1,792,653
437,731
471,022
Depreciation and amortization
183,907
38,209
62,410
13,106
Total expenses
7,260,342
10,564,746
2,369,622
1,843,389
Loss from operations
(8,852,898
)
(11,741,593
)
(3,618,423
)
(2,317,323
)
Other income (expenses):
Interest income
256
1,553
1
329
Interest expense
(486,299
)
(60,858
)
(190,983
)
(32,709
)
Other income
62,099
-
51,620
-
Financing costs
-
(3,899,866
)
-
(974,939
)
Loss on disposal of equipment
-
(1,893
)
-
-
Loss on equity investment
(105,426
)
(52,037
)
(47,345
)
(17,128
)
Amortization of discount on convertible debt
(1,414,594
)
-
(559,090
)
-
Gain (loss) on fair value of derivative
(2,579,818
)
-
(2,867,674
)
-
Total other income (expenses)
(4,523,782
)
(4,013,101
)
(3,613,471
)
(1,024,447
)
Loss before provision for income taxes
(13,376,680
)
(15,754,694
)
(7,231,894
)
(3,341,770
)
Provision for income taxes
2,055
18,021
25
10,429
Net loss
$
(13,378,735
)
$
(15,772,715
)
$
(7,231,919
)
$
(3,352,199
)
Net loss per common share - basic and diluted
$
(1.83
)
$
(2.22
)
$
(0.98
)
$
(0.46
)
Weighted average number of shares - basic and diluted
7,305,825
7,111,900
7,354,554
7,277,192
See accompanying notes.
F-
26
BOOMERANG SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2012
AND 2011
(UNAUDITED)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(13,378,735
)
$
(15,772,715
)
Adjustments to reconcile net loss operations to net cash (used in) operating activities:
Depreciation and amortization
183,907
38,209
Loss on disposal of equipment
-
1,893
Grant of options for services
472,399
1,812,939
Issuance of warrants for services
680,554
3,334,951
Issuance of warrants for financing
-
3,899,866
Issuance of common stock for services
50,001
-
Issuance of common stock for interest expense
469,160
-
Loss on fair value of derivative
2,579,818
-
Amortization of discount on convertible debt
1,414,594
-
Loss on equity investment
105,426
52,037
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable
185,976
(170,806
)
(Increase) in restricted cash
(593,228
)
-
Decrease in notes receivable
16,748
8,710
(Increase) in notes receivable (non-current)
-
(683
)
(Increase) in security deposit
(20,825
)
-
Decrease/(increase) in costs and estimated earned profits in excess of billings on completed contracts
204,302
(453,199
)
(Increase) in inventory
(82,030
)
(200,667
)
(Increase) in prepaid expenses and other assets
(21,892
)
(19,053
)
(Decrease) in accounts payable and accrued liabilities
(100,356
)
(63,853
)
Increase in due to related party
132,457
212,600
(Decrease)/increase in deposit payable
(55,000
)
15,000
Increase/(decrease) in billings in excess of costs and estimated earned profits on uncompleted contracts
514,408
(48,186
)
Increase in estimated loss on uncompleted contract
443,631
158,589
NET CASH (USED IN) OPERATING ACTIVITIES
(6,798,685
)
(7,194,368
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(97,710
)
(1,446,648
)
Additional equity investment
(186,600
)
(57,534
)
NET CASH (USED IN) INVESTING ACTIVITIES
(284,310
)
(1,504,182
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable and line of credit
(1,722,497
)
(21,097
)
Proceeds from notes payable and line of credit
2,176,000
3,550,000
Proceeds from private placement- convertible notes
9,825,000
Proceeds from private placement- common stock
-
1,199,999
NET CASH PROVIDED BY FINANCING ACTIVITIES
10,278,503
4,728,902
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
3,195,508
(3,969,648
)
CASH AND CASH EQUIVALENTS - beginning of period
65,590
4,284,362
CASH AND CASH EQUIVALENTS- end of period
$
3,261,098
$
314,714
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
Cash paid for:
Interest
$
8,642
$
-
Income taxes
$
2,080
$
9,892
Non-cash investing and financing activites:
Conversion of notes payable and accrued interest into convertible debt
$
6,799,520
$
-
Issuance of common stock for interest expense
$
469,160
$
-
Conversion of debt and accrued interest into common stock
$
-
$
398,012
See accompanying notes.
F-
27
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
The Company
The Company, through its wholly owned subsidiary, Boomerang
Utah, is engaged in the design, development, and marketing of automated storage and retrieval systems for automobile parking and
containerized self-storage units. The Company was a developmental stage company through the first quarter of fiscal 2008.
Unless the context otherwise requires, the terms "Company,"
"we," "our," and "us," means Boomerang Systems, Inc. and its consolidated subsidiaries.
On June 20, 2011, an amendment to the Company's Certificate
of Incorporation was filed, effecting a one-for-twenty reverse split (the "Reverse Split") of Boomerang's common
stock. The par value of the Company's common stock remained $0.001 per share and the number of shares of common stock authorized
to be issued remained at 400,000,000.
All share numbers in the financial statements give effect to
the Reverse Split.
Our fiscal year end is September 30
th
.  We
define fiscal year 2012 as the twelve month period ended September 30, 2012.
Basis of Presentation:
The accompanying unaudited consolidated financial statements
of the Company have been prepared for the interim period and are unaudited (consisting only of normal recurring adjustments) which
are in the in opinion of management, necessary for a fair presentation of the financial position and operating results for the
periods presented. The results of operations for the three and nine months ended June 30, 2012 are not necessarily indicative of
the results for the Company to be expected for the full fiscal year ending September 30, 2012.
Reclassification:
Certain three and nine month ended June 30, 2011 items have
been reclassified to conform to the three and nine month ended June 30, 2012 presentation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
Revenues from the sales of RoboticValet™ and rack and
rail systems will be recognized using the percentage of completion method, whereby revenue and the related gross profit is determined
by comparing the actual costs incurred to date for the project to the total estimated project costs at completion.
Project costs generally include all material and shipping costs,
our direct labor, subcontractor costs and an allocation of indirect costs related to the direct labor. Changes in the project scope,
site conditions, staff performance and delays or problems with the equipment used on the project can result in increased costs
that may not be billable or accepted by the customer and a loss or lower profit from what was originally anticipated at the time
of the proposal.
Estimates for the costs to complete the project are periodically
updated by management during the performance of the project. Provisions for changes in estimated costs and losses, if any, on uncompleted
projects are made in the period in which such losses are determined.
When the current estimate of total contract costs exceeds the
current estimate of total contract revenues, a provision for the entire loss on the contract is made.  Losses are recognized
in the period in which they become evident under the percentage-of-completion method.  The loss is computed on the basis of
the total estimated costs to complete the contract, including the contract costs incurred to date plus the estimated costs to complete. 
As of June 30, 2012, it was estimated that we would incur a gross loss of $3,274,083 on one of our current contracts, which began
in fiscal year 2010. This loss is comprised of $2,641,968 recognized through the percentage of completion method from the inception
of the contract through June 30, 2012, and $632,115 as a provision for the remaining loss on a contract as of June 30, 2012.
F-
28
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues of $477,290 and $1,319,620 have been recognized for
the nine months ended June 30, 2012 and 2011, respectively, under the percentage of completion method, and $96,512 and $0 for the
three months ended June 30, 2012 and 2011, respectively.
The Company may have service contracts in the future after the
contract warranty period is expired, which are separate and distinct agreements from project agreements and will be billed according
to the terms of the contract.
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.
Earnings Per Common Share:
We adopted ASC 260,
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 nine months ended June 30, 2012 and 2011 were 7,305,825 and 7,111,900, respectively, and for the three months ended June 30,
2012 and 2011 were 7,354,554 and 7,277,192, respectively.  The Company's common stock equivalents, of outstanding
options and warrants, have not been included as to include them would be anti-dilutive. As of June 30, 2012 and 2011, there were
fully vested options outstanding for the purchase of 641,385 and 641,385 common shares, respectively, and warrants for the purchase
of 8,472,266 and 3,986,184 common shares, respectively, both of which could potentially dilute future earnings per share.
Stock-Based Compensation:
The analysis and computation was performed based on our adoption
of ASC 718-10-25,
Compensation – Stock Compensation
, which requires the recognition of the fair value of stock-based
compensation.  For the nine months ended June 30, 2012 and 2011, we conducted an outside independent analysis and our
own review, and based on the results, we recognized $472,399 and $562,942 in share-based payments related to non-vested stock options
that were issued from fiscal year 2008 through 2010, respectively, and $114,715 and $160,695 for the three months ended June 30,
2012 and 2011, respectively. We recognized $0 and $1,249,997 for fully vested options issued during the nine months ended June
30
, 2012
and 2011, respectively, and $0 and $0 for the three months ended June 30, 2012 and 2011,
respectively. We recognized $680,554 and $7,234,817 for the issuance of warrants during the nine months ended June 30
,
2012
and 2011, respectively, and $96,352 and $974,939 for the three months ended June 30, 2012 and 2011, respectively. We
also recognized $50,001 and $0 for the issuance of common stock for services during the nine months ended June 30, 2012 and 2011,
respectively, and $50,001 and $0 for the three months ended June 30, 2012 and 2011, respectively.
Derivative liability
The Company accounts for reset provisions in connection with
their issuance of debt, and reset provisions of equity instruments attached to their debt, in accordance with Emerging Issues Task
Force ("EITF") Consensus No. 07-5 "Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity's
Own Stock" (EITF 07-5"). Under EITF 07-5, instruments which contain full ratchet anti-dilution provisions are no longer
considered indexed to a company's own stock for purposes of determining whether it meets the first part of the scope exception
in paragraph 11 (a) of FASB 133 "Accounting for Derivative Instruments and Hedging Activities", now promulgated in
ASC 815, "Derivative and Hedging". Under ASC 815 the Company is required to (1) evaluate an instrument's contingent
exercise provisions and (2) evaluate the instrument's settlement provisions.
F-
29
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value Measurements
As defined in FASB ASC Topic 820 – 10,
"Fair
Value Measurements and Disclosures,"
fair value is the price that would be received upon the sale of an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 –
10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.
The statement requires fair value measurements be classified and disclosed in one of the following categories:
Level 1:
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:
Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3:
Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company's valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.
As required by FASB ASC Topic 820 – 10, financial assets
and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company's
assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation
of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The estimated fair value of the derivative liability was calculated
using the Black-Scholes option pricing model.
The following table sets forth, by level within the fair value
hierarchy, the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of
June 30, 2012:
Fair Value Measurements at June 30, 2012
Description
(Level 1)
(Level 2)
(Level 3)
Total
Carrying
Value
Derivative liability
$
-
$
-
$
13,411,740
$
13,411,740
Total
$
-
$
-
$
13,411,740
$
13,411,740
The Company incurred the derivative
liability set forth on the June 30, 2012 balance sheet in connection with the Offering (see Note 7). The initial carrying value
of the derivative liability was $10,831,922.
F-
30
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Research and Development:
Pursuant to ASC 730,
Research and Development
, research
and development costs are expensed as incurred. Research and Development expense for the nine months ended June 30, 2012 and 2011
were $1,033,435 and $1,792,653, respectively, and $437,731 and $471,022 for the three months ended June 30, 2012 and 2011, respectively.
Advertising:
Advertising costs amounted to $114,783 and $201,374 for the
nine months ended June 30, 2012 and 2011
,
respectively, and $42,944 and $62,591 for the three months ended March 31, 2012
and 2011, respectively. Advertising costs are included in Sales and Marketing and expensed as incurred.
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.
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 June 30, 2012 and September 30, 2011.
NOTE 3 – INVESTMENT AT EQUITY
The Company is a partner in the United Arab Emirates "UAE"
joint venture, Boomerang Systems Middle East, LLC.   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.  The
equity method is used to calculate the current amount of this investment.
During the nine months ended June 30, 2012, the Company made
additional investments in the UAE joint venture of $45,600.  Based on the equity method, the 49% loss we recognized on
this investment for the nine months ended June 30, 2012 was $44,150.  After factoring in the loss, our carrying value
on this investment was $141,286 at June 30, 2012.
Balance as of September 30, 2011
$
139,836
Additional investment
45,600
Loss on investment (49%)
(44,150
)
Balance as of June 30, 2012
$
141,286
On February 15, 2012, Boomerang MP Holdings, Inc., a wholly
owned subsidiary of the Company, was formed with the purpose of entering into a mechanical parking joint venture. On February 16,
2012, Boomerang MP Holdings, Inc., formed a joint venture with Stokes Industries-USA, LLC ("Stokes"). The joint venture,
Boomerang-Stokes Mechanical Parking LLC, is owned 50% by Boomerang MP Holdings, Inc. and 50% by Stokes. Boomerang MP Holdings,
Inc., is committed to providing a minimum of $250,000 of capital to fund the initial operations and marketing efforts during the
initial two year period of the joint venture. Boomerang MP Holdings, Inc., shall also license the name "Boomerang"
to the joint venture for use in North America on a royalty free, non-exclusive basis.
F-
31
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 3 – INVESTMENT AT EQUITY (continued)
During the nine months ended June 30, 2012, the Company made
an investment of $141,000 in the joint venture. Based on the equity method, the 50% loss we recognized on this investment for the
nine months ended June 30, 2012 was $61,276. After factoring in the loss, our carrying value on this investment was $79,724 at
June 30, 2012.
Balance as of September 30, 2011
$
-
Additional investment
141,000
Loss on investment (50%)
(61,276
)
Balance as of June 30, 2012
$
79,724
NOTE 4- INVENTORY
Inventory consisting of parts, materials and assemblies is stated
at the lower of cost or market. Cost is determined using the weighted cost method. Inventory was $284,219 and $202,189 at June
30, 2012 and September 30, 2011, respectively.
NOTE 5 - 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, which range from three to fifteen
years.  Depreciation and amortization for the nine months ended June 30, 2012 and 2011 were $183,907 and $38,209, respectively,
and $62,410 and $13,106 for the three months ended June 30, 2012 and 2011, respectively.
Property, plant and equipment consist of the following at June
30, 2012 and September 30, 2011:
June 30, 2012
(Unaudited)
September 30, 2011
Computer equipment
$
280,245
$
242,149
Machinery and equipment
1,274,837
96,855
Furniture and fixtures
62,803
35,856
Leasehold improvements
62,469
62,469
Buildings
1,450,450
-
Construction in progress (1)
-
2,595,765
$
3,130,804
$
3,033,094
Less: Accumulated depreciation
(342,323
)
(158,416
)
$
2,788,481
$
2,874,678
(1) All construction in progress at September 30, 2011, was
for the demonstration facility at Crystal Springs Resort which was completed in October 2011 and reallocated to Machinery and equipment
and Buildings.
NOTE 6 – BILLINGS IN EXCESS OF COSTS/COSTS IN EXCESS
OF BILLINGS
The Company entered into two contracts, one in fiscal 2010 and
one in fiscal 2011 for construction of rack and rail-based parking systems and is recognizing revenue on the percentage of completion
method.
Information with respect to uncompleted contracts at June 30,
2012 and September 30, 2011 is as follows:
F-
32
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 6 – BILLINGS IN EXCESS OF COSTS/COSTS IN EXCESS
OF BILLINGS (continued)
June 30, 2012
September 30, 2011
Costs in excess of billings:
(Unaudited)
Earnings on billings to date
$
1,901,176
$
2,105,478
Less: Billings
(1,584,265
)
(1,584,265
)
Total costs in excess of billings
$
316,911
$
521,213
June 30, 2012
September 30, 2011
Billings in excess of costs:
(Unaudited)
Earnings on billings to date
$
681,592
$
-
Less: Billings
(1,196,000
)
-
Total (billings in excess of costs)
$
(514,408
)
$
-
NOTE 7- DEBT
Current Debt
The Company entered into a sixty month capital equipment lease
with a third party commencing in December 2007. The total principal balance of this lease was $135,675 at an annual rate of 6.45%.
At June 30, 2012, the outstanding principal balance was $15,613, all of which was classified as current debt.
Effective February 6, 2008, the Company was indebted for an
unsecured loan to a third party. As of June 30, 2012, 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 June 30, 2012, the balance of the
loan including accrued interest was $95,877.
On May 16, 2012, the Company entered into a $400,000 line of
credit with a bank, which bore interest at a rate of 5% per annum and was due on August 14, 2012. During the quarter, the Company
borrowed an aggregate of $400,000 under the line. The line of credit was paid in full and terminated on June 14, 2012.
Long-Term Debt
Private Placement Offering – November/December 2011
On November 1, 2011, the Company issued to subscribers ("Subscribers")
6% convertible promissory notes ("Notes") in the aggregate principal amount of approximately $9.4 million and warrants
("Warrants") to purchase approximately 2.2 million shares of Common Stock of the Company in the first of three (3)
closings of a private placement (the "Offering") for which the Company received cash proceeds of approximately $2.7
million and refinanced approximately $6.7 million of then existing short-term indebtedness. For each $100,000 invested, a Subscriber
was issued a $100,000 principal amount Note and Warrants to purchase 23,530 shares of the Company's Common Stock.
As part of the Offering, on November 18, 2011, we issued to
Subscribers Notes in the aggregate principal amount of approximately $1.35 million and Warrants to purchase approximately 318,000
shares of Common Stock for which the Company received cash proceeds of approximately $1.25 million and refinanced approximately
$100,000 of indebtedness.
As part of the Offering, on December 9, 2011, we issued to Subscribers
Notes in the aggregate principal amount of approximately $925,000 and Warrants to purchase approximately 218,000 shares of Common
Stock, of which the Company received cash proceeds of approximately $925,000.
F-
33
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 7- DEBT (continued)
The Notes are due five years after the respective date of issuance
and are convertible into Common Stock at $4.25 per share (the "Conversion Price"), subject to weighted average adjustment
for issuances of common stock or common stock equivalents below the Conversion Price, subject to certain exceptions. The Warrants
issued with the debt have a five year life with an initial exercise price of $4.25 per share, subject to adjustment for issuances
of common stock or common stock equivalents below the Conversion Price, subject to certain exceptions.
Interest accrues on the Notes at 6% per annum. Interest is payable
quarterly, commencing on December 31, 2011, at the Company's option, interest may be payable in: (i) cash or (ii) shares
of the Common Stock. If the Company elects to pay interest in shares of its Common Stock on an interest payment date, the number
of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable on such
interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale price of the Common Stock
during the ten (10) consecutive trading days ending on the
fifth (5th) trading day immediately preceding such interest
payment date (the "Average Price"), if the average daily trading volume (the "ADTV") of the Common Stock
for the ten (10) trading days prior to the interest payment date is less than $100,000
per day, provided, however if the ADTV is equal to or greater
than $100,000, it will be the Average Price, and not the Conversion Price.
The outstanding principal amount of the Notes and accrued and
unpaid interest thereon will automatically convert into a number of shares of Common Stock determined by dividing the outstanding
principal amount of the Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect on the mandatory conversion
date. The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30 immediately
preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of the Notes are
eligible for resale under an effective
registration statement and/or Rule 144 promulgated under the
Securities Act of 1933, as amended, without restriction as to volume or manner of sale and (iii) the ADTV during such 30 trading
day period equals or exceeds $500,000.
The Company also entered into a registration rights agreement
with the subscribers. Pursuant to the registration rights agreement, the Company agreed to file a registration statement within
90 days after the closing date of the Offering (the "Closing Date") to register for resale the shares of common stock
issuable upon conversion of the Notes and exercise of the Warrants and Placement Agent Warrants (collectively, the "Registrable
Shares"). The registration statement was timely filed and declared effective by the SEC. The Company shall use its best efforts
to cause any additional registration statements it may be required to file to be declared effective within 90 days of the required
filing date.
In the event that a registration statement is not filed or declared
effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable Shares an amount equal to 1%
of the original principal amount of the investor's Note, multiplied by a fraction with the numerator equal to the number
of Registrable Shares that were required to be included in such registration statement which is not so filed, declared effective
or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total number of
shares issued or issuable to the Investor upon conversion of the Notes and exercise of the Warrants purchased pursuant to the subscription
agreement and owned by such holder.
If an event of default as defined in the Notes exists, the holder
may declare the entire principal of, and all interest accrued and unpaid on, the Note then outstanding to be, due and payable.
The Company has valued the Warrants, and the beneficial conversion
features ("BCF") of the Notes, to their maximum value in proportion to the Notes and had accounted for them as a discount
to the debt. In certain circumstances the convertibility features and the attached Warrants contain reset provisions which adjust
the conversion price of the Notes and the exercise price of the Warrants should the Company sell additional shares of common stock
below the initial conversion price of the Notes or warrant exercise price as agreed to upon entry into the convertible notes payable.
The Company has assessed that the reset provision for the convertibility feature and the warrant exercise price are such that they
are not indexed to the Common Stock and is therefore a derivative in accordance with ASC 815-40 (formerly EITF 07-5). As such the
derivative was valued on the date of its initiation, with each issuance of convertible debt, and will be re-valued at its fair
value at each subsequent interim and annual reporting period.
The Company valued the Warrants and the BCF, and the resulting
derivative liability, at $5,309,941 each for the 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 will be amortized over the life of the note or until such
time as the note is repaid or converted, or upon exercise of the Warrants. The valuation of the 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 52.7% iii) risk free interest rate of 0.9% and expected term of 5 years. During the nine
months ended June 30, 2012 the Company has amortized $1,386,500 of the of debt discount.
F-
34
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 7 – DEBT (continued)
As of the date(s) of the Note issuances the aggregate fair value
of the derivative was $10,619,882. The revaluation of the derivative as of June 30, 2012 resulted in a derivative value of $13,149,312.
The change in fair value of the derivative from the date(s) of note issuance through June 30, 2012 resulted in a loss on the fair
value of the derivative liability of $2,529,430 for the nine months ended June 30, 2012. The derivative liability was revalued
on June 30, 2012 using the Black-Scholes option pricing model with the following weighted assumptions: i) expected dividend rate
of 0% ii) expected volatility of 53.43% iii) risk free interest rate of 0.9% and expected term of 4.35 years.
In connection with the 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 Warrants issued to the purchasers
of Notes in the 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 Warrants issued to the purchasers of Notes
in the 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 $212,040 upon the Placement Agent Warrants grant, was revalued at $262,428 at June 30, 2012. The valuation at June 30, 2012
was valued based on the Black-Scholes Model with assumptions similar to those used to value the Warrants granted to the debt holders
as of
June 30, 2012. The difference in valuation for the nine months
ended June 30, 2012 was $50,388, accounted for as a loss on fair value of derivative.
Private Placement Offering – June 2012
On June 14, 2012, the Company issued to subscribers 6% convertible
promissory notes due on June 14, 2017 ("2012 Notes") in the aggregate principal amount of $5.0 million and warrants
to purchase Common Stock ("2012 Warrants") in a private placement (the "2012 Offering") for aggregate gross
cash proceeds of $5.0 million. For each $100,000 invested, a subscriber was issued a $100,000 principal amount 2012 Note and 2012
Warrants to purchase 20,000 shares of the Company's Common Stock.
The 2012 Notes are convertible into Common Stock at $5.00 per
share (the "Conversion Price"), 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.
Interest accrues on the 2012 Notes at 6% per annum. Interest
is payable quarterly, commencing on June 30, 2012. At the Company's option, interest may be payable in: (i) cash or (ii)
shares of the Common Stock. If the Company elects to pay interest in shares of its Common Stock on an interest payment date, the
number of shares issuable will be equal to the quotient obtained by dividing the amount of accrued and unpaid interest payable
on such interest payment date by the lesser of: (i) the Conversion Price, and (ii) the average of the last sale price of the Common
Stock during the ten (10) consecutive trading days ending on the fifth (5th) trading day immediately preceding such interest payment
date (the "Average Price"), if the average daily trading volume (the "ADTV") of the Common Stock for the
ten (10) trading days prior to the interest payment date is less than $100,000 per day, provided, however if the ADTV is equal
to or greater than $100,000, it will be the Average Price, and not the Conversion Price.
The outstanding principal amount of the 2012 Notes and accrued
and unpaid interest thereon will automatically convert into a number of shares of Common Stock determined by dividing the outstanding
principal amount of the 2012 Notes plus accrued and unpaid interest thereon, by the Conversion Price in effect on the mandatory
conversion date. The mandatory conversion date is the date on which (i) the last sale price of the Common Stock on 20 of the 30
immediately preceding trading days equals or exceeds 200% of the Conversion Price; (ii) the shares issuable upon conversion of
the 2012 Notes are eligible for resale under an effective registration statement and/or Rule 144 promulgated under the Securities
Act of 1933, as amended, without restriction as to volume or manner of sale, and (iii) the ADTV during such 30 trading day period
equals or exceeds $500,000.
F-
35
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 7 – DEBT (continued)
If an event of default as defined in the 2012 Notes exists,
the holder may declare the entire principal of, and all interest accrued and unpaid on, the 2012 Notes then outstanding to be due
and payable.
The Company also entered into a registration rights agreement
with the subscribers. Pursuant to the registration rights agreement, the Company agreed to file a registration statement within
90 days after the final closing date of the Offering which occurred on July 13, 2012 (the "Closing Date") to register
for resale the shares of Common Stock issuable upon conversion of the 2012 Notes and exercise of the 2012 Warrants and 2012 Placement
Agent Warrants defined below (collectively, the "Registrable Shares"). In the event that the SEC limits the number
of Registrable Shares that may be included in the registration statement, the Company shall include only those Registrable Shares
permitted by the SEC and shall file additional registration statements at the earliest practical date as the Company is permitted
to do so in accordance with SEC guidelines. The Company shall use its best efforts to cause (i) the registration statement to be
effective within 150 days of the Closing Date, and (ii) any additional registration statements to be declared effective within
90 days of the required filing date.
In the event that a registration statement is not filed or declared
effective by the SEC by the applicable deadline, the Company will pay to the holders of Registrable Shares an amount equal to 1%
of the original principal amount of the investor's 2012 Note, multiplied by a fraction with the numerator equal to the number
of Registrable Shares that were required to be included in the Registration Statement which is not so filed, declared effective
or maintained and otherwise are unsold at the time of such failure and the denominator equal to the sum of the total number of
shares issued or issuable to the Investor upon conversion of the 2012 Notes and exercise of the 2012 Warrants purchased pursuant
to the subscription agreement and owned by such holder.
The Company has valued the 2012 Warrants and the beneficial
conversion features ("BCF") of the 2012 Notes, to their maximum value in proportion to the notes and had accounted
for them as a discount to the debt. In certain circumstances the convertibility features and the 2012 Warrants contain reset provisions
which adjust the conversion price and the exercise price of the warrants should the Company sell additional shares of common stock
below the initial conversion price of the 2012 Notes or 2012 Warrant exercise price as agreed to upon entry into the convertible
notes payable. The Company has determined that the 2012 Notes are a derivative instrument due to the reset provision contained
within the notes. A derivative liability was not recorded when the 2012 Offering was entered into as the value of the such a derivative
was immaterial due to the Company's limited history with adjusting instruments from previous fundraisings that have similar reset
provisions. If the 2012 Notes' reset provision should be triggered, a reassessment of recording a derivative will be made
at such time.
The Company valued the 2012 Warrants and the BCF at $1,580,308
each for a total of $3,160,616 recorded as a discount to the convertible debt during the third quarter of fiscal 2012. This discount
will be 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 nine months ended June 30, 2012 the Company has amortized
$28,094 of the of debt discount.
In connection with the 2012 Offering, the Company paid a placement
agent and another registered broker-dealer cash fees of approximately $274,000 in the aggregate. The Company issued to the placement
agent warrants (the "2012 Placement Agent Warrants") to purchase 41,700 shares of Common Stock, which expire on June
14, 2017. The 2012 Placement Agent Warrants contain substantially the same terms as those issued to subscribers.
F-
36
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 7 – DEBT (continued)
Principal
As of
Current Debt- Third Party:
6/30/2012
9/30/2011
Maturity Date
Interest Rate
Secured
(Unaudited)
Loan Payable- Third Party
$
80,538
$
80,538
Upon Demand
10
%
No
Lease Payable- Bank (current portion)
15,613
30,242
12/31/2012
6.45
%
Yes
Total Current Debt- Third Party
$
96,151
$
110,780
Long-Term Debt – Third Party:
Convertible Notes
3,665,763
-
11/1/2016
6
%
No
Convertible Notes
1,250,000
-
11/18/2016
6
%
No
Convertible Notes
925,000
-
12/9/2016
6
%
No
Convertible Notes
3,965,000
-
6/14/2017
6
%
No
Promissory Notes – Line of Credit
-
1,500,000
11/1/2016
(1)
6
%
No
Line of Credit - Bank
-
1,000,000
11/1/2016
(1)
6
%
No
Promissory Note – Bank
-
300,000
11/1/2016
(1)
6
%
No
Lease Payable- Bank
-
7,869
12/31/2012
6.45
%
Yes
Discount on Convertible Notes
(7,842,348
)
-
Amortization of Discount
705,118
-
Total Long-Term Debt – Third Party
$
2,668,533
$
2,807,869
Long-Term Debt- Related Party:
Convertible Notes – Related Party
$
5,683,757
$
-
11/1/2016
6
%
No
Convertible Notes – Related Party
100,000
-
11/18/2016
6
%
No
Convertible Notes – Related Party
1,035,000
-
6/14/2017
6
%
No
Loan Payable- Related Party
-
273,000
11/1/2016
(1)
6
%
No
Loan Payable- Related Party
-
273,000
11/1/2016
(1)
6
%
No
Loan Payable – Related Party
-
220,763
11/1/2016
(1)
6
%
No
Loan Payable – Related Party
-
133,571
11/1/2016
(1)
6
%
No
Loan Payable – Related Party
-
775,000
11/1/2016
(1)
6
%
No
Promissory Notes – Line of Credit
-
1,750,000
11/1/2016
(1)
6
%
No
Discount on Convertible Notes
(5,938,150
)
-
Amortization of Discount
709,476
-
Total Long-Term Debt- Related Party
$
1,590,083
$
3,425,334
(1)
This debt was reclassified from current to long-term pursuant to ASC 470-10-45-14. On November 1, 2011, as part of the Offering, this debt was refinanced through the issuance of long-term notes.
F-
37
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 7 – DEBT (continued)
Capital lease payable to bank*
6/30/2012
9/30/2011
(Unaudited)
Secured by equipment
$
15,613
$
38,111
Less: current maturities
(15,613
)
(30,242
)
Total long-term debt
$
-
$
7,869
*payable in monthly installments of $2, 651 including
interest at 6.448% maturing on December 1, 2012
NOTE 8- EQUITY
Common Stock:
On April 11, 2012, the Company issued 11,765 shares of common
stock to Dave Koch, our COO, pursuant to his employment agreement as payment for services provided. These shares of stock were
issued at $4.25 per share and the Company recorded an expense of $50,001 related to this issuance.
On June 30, 2012, the Company issued 40,925 shares of common
stock in lieu of a cash payment of $173,890 of interest for the quarter ended June 30, 2012. Pursuant to the terms of the Notes,
these shares of stock were issued at $4.25 per share.
On June 30, 2012, the Company issued 2,795 shares of common
stock in lieu of a cash payment of $13,151 of interest for the quarter ended June 30, 2012. Pursuant to the terms of the 2012 Notes,
these shares of stock were issued at $4.73 per share.
At June 30, 2012, the Company reserved shares of common stock
for issuance upon exercise as follows:
Options
641,385
Warrants
8,472,266
Convertible Notes
3,735,206
Total Shares Reserved
12,848,857
Options:
As of June 30, 2012, there was approximately $67,000 of total
unrecognized costs related to unvested stock options granted to employees. These costs are expected to be recognized over the next
two fiscal years.
Warrants:
Pursuant to the 2012 Offering described in Note 7, on June 14,
2012, we issued 2012 Warrants to subscribers to purchase 1,000,000 shares of Common Stock of the Company.
In connection with the 2012 Offering, we issued warrants to
the placement agent (the "2012 Placement Agent Warrants") to purchase shares of Common Stock. We issued 2012 Placement
Agent Warrants to purchase 41,700 shares of Common Stock in June 2012. We valued and expensed these warrants at $96,352 during
the three months ended June 30, 2012, based on the Black-Scholes Model. These 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 2012 Warrants are exercisable at $5.00 per share, subject
to weighted average adjustment for issuance below the exercise price, subject to certain exceptions. Additionally, the Exercise
Price may not be adjusted below $0.25. Cashless exercise is permitted if the average trading volume of the Company's Common
Stock during at least five (5) of the ten (10) consecutive trading days immediately preceding the date of the notice of exercise
is at least 10,000 shares, and will be based upon the average of the last sale price of the Common Stock during the five (5) consecutive
trading days prior to the notice of exercise. In certain instances, a holder shall not be permitted to exercise the 2012 Warrants
if such exercise would result in such holder's total ownership of the Company's Common Stock exceeding 4.9%. The 2012
Warrants expire on June 14, 2017.
F-
38
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 9 - RELATED PARTY TRANSACTIONS
HSK Funding, Inc., Lake Isle Corp., and Venturetek,
LP, are beneficial holders of shares of our Company's common stock 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 sole voting and investment control over Lake Isle Corp., is the mother of Christopher Mulvihill, our
President, and is a principal stockholder of our Company.  SB&G entered into a lease with Boomerang Utah dated October
1, 2008, relating to premises located at 324 West 2450 North, Building A, Logan, Utah ("Building A").  The
Company assumed this lease in February 2008.  The initial term of the lease was for one year with an annual rent of $260,610
plus real property and school taxes. In addition, Boomerang is obligated to pay for all utilities, repairs and maintenance to the
property. The approximately 29,750 square foot leased premises are used for Boomerang's manufacturing activities.  On
March 15, 2010, Boomerang and SB&G agreed to maintain these terms until September 30, 2011. This lease has been extended on
a month-to-month basis.  On November 1, 2011, deferred rental payments totaling $220,763 were refinanced as part of the
private placement offering described in Note 7 – Debt. Deferred rental payments totaling $132,457 have been accrued as of
June 30, 2012 and classified as due to related party on our balance sheet.
Stan Checketts Properties ("SCP"), a company owned
by the chief executive officer of Boomerang's wholly owned subsidiary, Boomerang Sub, Inc., entered into a lease with Boomerang
Utah dated October 1, 2008 for premises located at 324 West 2450 North, Building B, Logan, Utah.  The Company assumed
this lease in February 2008.  The initial term of the lease was for one year at a fixed annual rent of $157,680 plus
real property and school taxes. In addition, Boomerang is obligated to pay for all utilities and for repairs and maintenance to
the property.  The approximately 18,000 square foot leased premises are, in addition to Building A, also used for Boomerang's
manufacturing activities.  We are currently leasing an additional 2,400 square feet of office and conference room
space with Stan Checketts Properties for $1,800 per month. On March 15, 2010, Boomerang and SCP agreed to maintain these terms
until September 30, 2011. On October 28, 2011, Boomerang and SCP amended the terms of the lease to provide for a monthly payment
of $14,940, effective as of October 1, 2011. On November 1, 2011, deferred rental payments totaling $133,571 were refinanced as
part of the private placement offering described in Note 7 – Debt.
SB&G is obligated on a twenty-year promissory note due August
1, 2027 owing to Zions Bank. The principal amount due was $745,578 as of June 30, 2012, and the note bears interest at 3.807%
per annum. The promissory note is collateralized by the real property that is the subject of the lease from SB&G to Boomerang
Utah. Boomerang and Messrs. Gene Mulvihill, Stan Checketts, and Burton Koffman ("Koffman") are the joint and several
guarantors of this promissory note.  Gene Mulvihill is the husband of Gail Mulvihill and the father of Christopher
Mulvihill, the President of the Company.
Messrs. Gene 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.
The Company used the services of Coordinate Services, Inc. for
product development.  The owner of this company is Gene Mulvihill, Jr. who is the brother of Christopher Mulvihill, our
President, and the son of Gail Mulvihill.  The amount of this expense for the nine months ended June 30, 2012 and 2011
was $116,103 and $106,694 respectively; which is recorded under Research and Development expenses.
The Company reimbursed North Jersey Management Services, Inc.
for payroll related expenses for the services of Joseph Bellantoni, the former Chief Financial Officer of the Company, and Maureen
Cowell, the Company's Corporate Secretary.  Mr. Bellantoni is also the President and Mrs. Cowell is the Vice President
of North Jersey Management Services, Inc.  The amount of this expense for the nine months ended June 30, 2012 and 2011
was $58,500 and $58,500 respectively; which is recorded under General and Administrative expenses.
F-
39
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 9 - RELATED PARTY TRANSACTIONS (continued)
In April 2010, we entered into a twenty-year ground lease with
Route 94 Development Corporation ("Route 94") to lease a portion of an approximately fifteen acre parcel in the town
of Hamburg, located in Hardyston Township, New Jersey, on which we constructed a RoboticValet™ parking facility.  The
leased property is adjacent to Grand Cascades Lodge ("Cascades"), a hotel within the Crystal Springs Golf and Spa Resort
("the Resort"). The parking facility was constructed by Crystal Springs Builders, LLC ("Builders").  
It is intended that this facility will be used by us primarily for demonstration and marketing purposes in the eastern portion
of the United States.  In consideration of the benefits to us under the terms of the lease, we agree to provide to the lessor
and its affiliates parking and storage space within the facility at no cost to the lessor and its affiliates subject to our right
to use the facility for demonstration purposes.  In addition, we are required to pay the operating costs, premiums on the
insurance required under the terms of the lease and incremental property taxes resulting from our construction of the facility. 
For a period of 60 months, commencing five years after execution of the lease, the lessor has the option to purchase the facility
from us and we have a right to cause the lessor to buy from us the facility we construct.  The price to be paid by the lessor
upon exercise of its option to purchase the facility is 110% of the greater of (i) the depreciated value of the facility, or (ii)
the fair market value of the facility, and the price to be paid by the lessor upon exercise of our right to cause the lessor to
buy the facility is $1.00.
The Resort owns and operates seven golf courses, two hotels
and a fitness facility and develops real estate in Sussex County NJ, which is comprised of more than 40 additional entities, including
the above named entities. Gail Mulvihill owns 50% of each of Builders, Cascades and Route 94 and, indirectly, through these and
various other entities, Gail Mulvihill and her family own approximately 50% of the Resort. Except as set forth above, no other
officer, director or 5% or greater stockholder of the Company has any equity interest in Builders, Cascades or Route 94.  The
Company incurred expenses of $0 and approximately $1,037,700 for Builders during the nine months ended June 30, 2012 and 2011,
respectively. The Company incurred expenses of approximately $47,000 and $73,000 for Cascades for the nine months ended June 30,
2012 and 2011, respectively. No expenses were incurred for Route 94 during the nine months ended June 30, 2012 and 2011.
During the quarter ended June 30, 2012, the Resort paid $50,000
to the Company for the purchase of mechanical parking equipment that will be provided by Boomerang-Stokes Mechanical Parking LLC.
At June 30, 2012, the Company recorded this amount as a payable and has subsequently paid the amount in full to Boomerang-Stokes
Mechanical Parking LLC.
Our management believes that the terms of the above transactions
are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under the circumstances
as when the transactions were entered into.
In connection with the 2012 Offering, the following related
parties of the Company participated in the 2012 Offering.
Name
2012 Notes issued
in 2012 Offering
2012 Warrants issued
in 2012 Offering
MRP Holdings LLC(1)
$
150,000
30,000
Sail Energy, LLC(2)
$
510,000
102,000
Heather Mulvihill(3)
$
100,000
20,000
IA 545 Madison Assoc.(4)
$
200,000
40,000
David Kent and Christine W. Koch(5)
$
75,000
15,000
(1)
Mark R. Patterson, the sole member of MRP Holdings LLC, is the Company's Chief Executive Officer and a director.
(2)
Sail Energy, LLC is owned by Gail Mulvihill, a principal stockholder and mother of Christopher Mulvihill, the Company's President and director.
(3)
Heather Mulvihill is the sister-in-law of Christopher Mulvihill and daughter-in-law of Gail Mulvihill.
(4)
Burton I. Koffman, a partner of IA 545 Madison Assoc., is a principal stockholder of the Company.
(5)
David Kent Koch is the Company's Chief Operating Officer.
F-
40
BOOMERANG SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 2012
NOTE 10- COMMITMENTS AND CONTINGENCIES
Boomerang Utah is a joint and several guarantor on a twenty-year
promissory note owing to Zions bank in the principal amount of $745,578, 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.  Messrs.
Gene Mulvihill, Checketts, and Koffman, are the other joint and several guarantors of the promissory note.
We entered into a five year lease on a new principal office,
which expires in November 2016. The aggregate future minimum annual rental payments on this lease, exclusive of escalation payments
for taxes and operating costs, are as follows:
Twelve months ended June 30, 2013
$
141,028
June 30, 2014
146,541
June 30, 2015
152,053
June 30, 2016
157,566
June 30, 2017
66,609
Total
$
663,797
NOTE 11 – SUBSEQUENT EVENTS
On July 13, 2012, the Company issued to subscribers 2012 Notes
in the aggregate principal amount of $1.2 million and 2012 Warrants to purchase an aggregate of 240,000 shares of Common Stock
in a private placement (the "2012 Offering") for aggregate gross cash proceeds of $1.2 million. For each $100,000 invested,
a subscriber was issued a $100,000 principal amount Note and Warrants to purchase 20,000 shares of the Company's Common Stock.
In connection with the 2012 Offering, the Company paid a placement agent and another registered broker-dealer cash fees of approximately
$78,000 in the aggregate. The Company issued to the placement agent warrants (the "2012 Placement Agent Warrants")
to purchase 13,100 shares of Common Stock, which expire on June 14, 2017.
F-
41
Up to $6,200,000 aggregate principal
amount of 6% convertible notes due 2017
and warrants to purchase up to 1,294,800
shares of common stock
and shares of common stock issuable
upon conversion of the notes and the warrants
PROSPECTUS
, 2012
PART II — INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 13.           Other
Expenses of Issuance and Distribution.
The following table sets forth the costs
and expenses, other than underwriting discounts and commissions, if any, payable by the Company relating to the sale of common
stock being registered. All amounts are estimates except the SEC registration fee:
SEC Registration Fee
$
1,939
Legal Fees and Expenses
$
40,000
Accounting Fees and Expenses
$
10,000
Miscellaneous Expenses
$
8,061
Total
$
60,000
Item 14.            Indemnification
of Directors and Officers
.
Section 145(a) of the Delaware General Corporation
Law authorizes a Delaware corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation), by reason of the fact that the person is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action,
suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful.
Section 145(b) further authorizes a Delaware
corporation to indemnify any person serving in any such capacity who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against
expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such
action or suit, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Delaware Court
of Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
To the extent that a present or former director
or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred
to above, or in defense of any claim, issue or matter therein, such person shall be indemnified by the corporation against expenses
(including attorneys' fees) actually and reasonably incurred by such person. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
II-
1
Section 102(b)(7) of the Delaware General
Corporation Law enables a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary damages for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the Delaware General Corporation Law (providing for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. These provisions
will not limit the liability of directors or officers under the federal securities laws of the United States.
As permitted by the Delaware General Corporation
Law, Boomerang Systems, Inc.'s certificate of incorporation, as amended, eliminates liability of its directors for monetary
damages to the fullest extent permitted under applicable law. Boomerang Systems, Inc.'s second amendment and restated bylaws
also provide, with certain exceptions, for indemnification to the fullest extent permitted by the Delaware General Corporation
Law.
Boomerang Systems, Inc. has entered into
indemnification agreements with all of its directors, other than Mark Patterson. These indemnification agreements, among other
things,
·
provide for indemnification which mirrors the provisions of the Delaware General Corporation Law;
·
provide for the mandatory advancement by Boomerang Systems, Inc. of expenses incurred by the director, provided that such director
will repay the amounts advanced if it is determined that the director was not entitled to be indemnified by Boomerang Systems,
Inc.;
·
provide further indemnification to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically
authorized in Boomerang Systems, Inc.'s certificate of incorporation, as amended, or second amendment and restated bylaws,
or the Delaware General Corporation Law; and
·
provide that if the Delaware General Corporation Law is subsequently amended to increase the rights of directors to indemnification,
those increased rights will be deemed to apply to Boomerang Systems, Inc., but if such rights are narrowed, there will be no affect
on the indemnification granted to the directors.
However, a director is not entitled to indemnification
under these agreements with respect to (i) claims initiated by the director (except claims relating to the director's right
to indemnification), (ii) claims relating to the director's right to indemnification that a court of competent jurisdiction
determines were not made in good faith or were frivolous; (iii) expenses or liabilities for which a directors' and officers'
liability insurance policy has paid the director directly; or (iv) expenses or payment of profits arising from the violation by
the director of Section 16(b) of the Exchange Act, or any successor statute.
Mr. Patterson's employment agreement
provides that Boomerang Systems, Inc. will indemnify him to the greatest extent permitted by Section 145 of the Delaware General
Corporation Law. These indemnification rights will survive the termination of Mr. Patterson's employment for any reason.
Boomerang Systems, Inc. has obtained directors' and officers' liability insurance which covers certain liabilities,
including liabilities to Boomerang Systems, Inc. and its stockholders, in the amount of $10 million.
II-
2
Item 15.               Recent
Sales of Unregistered Securities
1.
On May 15, 2009, the Company issued options to purchase an aggregate of 50,000 shares at an exercise price of $2.00 per share
to three employees in lieu of cash compensation. All such options expire on May 14, 2014.
2.
In fiscal 2009, the Company launched a private offering of its securities to affiliates and accredited investors in three tranches.
The private offering closed on December 14, 2009. On June 12, 2009, the Company completed the closing 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 proceeds for these shares of Preferred Stock sold in the First Tranche was $3,360,900 of which $1,895,000
was paid in cash and $1,465,900 was paid in forgiveness of debt. In September 2009, the Company amended its certificate of incorporation
to increase its authorized shares of common stock. As a result, under the terms of the Preferred Stock the 33,609 shares of Preferred
Stock were automatically converted into 1,680,450 shares of common stock in September 2009. On September 30, 2009, the Company
completed the Second Tranche which involved the sale of an aggregate of 554,713 shares of common stock. The aggregate offering
proceeds for the shares of common stock sold in the Second Tranche was $1,109,425 or $2.00 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 forgiven in exchange for
shares of Preferred Stock in the First Tranche. On December 14, 2009, the Company completed the Third Tranche which involved the
sale of an aggregate of 695,288 shares of common stock. The aggregate offering proceeds for the shares of common stock sold in
the Third Tranche was $1,390,575, or $2.00 per share, paid in cash.
3.
By virtue of defaults occurring in the payment of the outstanding principal and interest on $1,500,000 on the Company's
promissory notes issued in August 2008, on August 31, 2009, pursuant to the terms of the promissory notes the Company issued to
the holders of the promissory notes five-year common stock purchase warrants to purchase an aggregate of 127,588 shares of common
stock exercisable at a price of $14.40 per share.
4.
By virtue of the continuing defaults on the payment of the outstanding principal on the $1,500,000 promissory notes issued
in August 2008, on September 30, 2009, the Company issued to the holders of the promissory notes five-year common stock purchase
warrants to purchase an aggregate of 128,820 shares of common stock exercisable at a price of $13.80 per share. The consideration
received by the Company for the issuance of the common stock purchase warrants was a deferral in the payment of principal and accrued
interest on the promissory notes.
5.
On October 15, 2009, the Company granted options to three employees to purchase common stock in lieu of cash compensation.
In the aggregate, the employees received: (i) ten-year non-qualified fully vested options to purchase 1,000 shares of common stock
exercisable at $2.00 per share; and (ii) five-year non-qualified options to purchase 25,000 shares of common stock exercisable
at $2.00 per share which vest 25% on April 15, 2011 and 25% on each six month anniversary thereafter. The stock options to purchase
26,000 shares are subject to forfeiture until service conditions associated with their grant are satisfied.
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6.
The Company determined to use its financial resources for research and development and elected not to re-pay a promissory note
which came due in August 2009. The Company issued post-maturity or default warrants in October 2009 and November 2009. On October
31, 2009, the Company issued to the holder of the promissory note a five-year common stock purchase warrant to purchase 14,342
shares of common stock exercisable at $13.60 per share on account of the default occurring in for October 2009. On November 30,
2009, the Company issued to the holder of the promissory note a five-year common stock purchase warrant to purchase 4,385 shares
of common stock exercisable at $11.60 per share on account of the default occurring in November 2009.
7.
On November 30, 2009, the holders of $1,450,000 aggregate principal amount of the Company's 12% promissory notes issued
in August 2008 cancelled the amount due to them under the promissory notes in exchange for shares of the Company's common
stock at a price per share of $2.00. This transaction was completed on November 30, 2009 and $1,678,038 of principal and accrued
interest was exchanged for 839,003 common shares.
8.
On January 25, 2010, the Company issued 6% Convertible Promissory Notes to a third party and James Mulvihill, a related party,
with an aggregate principal amount totaling $460,000. In March 2010, the principal and all accrued interest thereon were converted
into 231,827 shares of common stock at a rate of $2.00 per share.
9.
On February 2, 2010, the Company granted to Joseph Bellantoni, the Company's then Chief Financial Officer, Stanley Checketts,
the Company's then Chief Executive Officer (who remains the CEO of its wholly-owned subsidiary, Boomerang Sub, Inc.) and
Maureen Cowell, the Company's Secretary, options to purchase common stock in lieu of cash compensation. Ten-year non-qualified
fully-vested options to purchase an aggregate of 290,000 shares of common stock at an exercise price of $2.00 per share were issued
to these directors. These stock options are subject to forfeiture until service conditions associated with their grant are satisfied.
10.
On February 2, 2010 and March 31, 2010, the Company granted to Steven C. Rockefeller, Jr., an independent director, warrants
to purchase an aggregate of 60,000 shares of common stock at an exercise price of $2.00 per share for service as a director. The
warrants have a term of 5 years.
11.
From March 31, 2010 through June 2, 2010, the Company sold an aggregate of 140,000 shares of common stock at $5.00 per share
in private placements to four accredited investors for aggregate cash proceeds of $700,000. These investors also received warrants
to purchase an aggregate of 140,000 shares of common stock with an exercise price of $5.00 per share. The warrants have a term
of five years.
12.
On June 1, 2010, the Company issued 140,000 shares of common stock to Mark Patterson, its Chief Executive Officer, as compensation
for employment. In addition, Mr. Patterson was issued warrants to purchase 140,000 shares of common stock at an exercise price
of $5.00 per share, which were cancelled on November 12, 2010 and replaced with warrants to purchase 280,000 shares of common stock
as described in note 18 below.
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13.
On July 8, 2010, the holders of an aggregate of $2,328,023 of outstanding indebtedness and obligations of the Company, all
of whom are related parties, agreed to cancel their indebtedness for common stock and common stock purchase warrants. The Company
owed J&A Financing, Inc. an aggregate principal amount plus accrued interest of $1,678,304. In deferred rent, the Company owed
SB&G Properties, LC $420,769 and Stan Checketts Properties $228,950. The exchange was for an aggregate of 465,605 shares of
the Company's common stock and an equal number of common stock purchase warrants to purchase shares of common stock, which
are exercisable for a period of five years at an exercise price of $5.00 per share. The exchange was at a rate of $5.00 for one
share of common stock and one warrant.
14.
On July 13, 2010, the Company completed a private placement with aggregate gross proceeds of $7,000,000. Of this amount, $1,330,000
of the securities was sold to six related parties (Burton I. Koffman, Gail Mulvihill, Mark Patterson, Venturtek, LP, Heather Mulvihill
and Peter and Ellen Mulvihill) and $5,670,000 was sold to twenty-five other accredited investors. In the offering, the Company
sold an aggregate of 1,400,000 shares of the Company's common stock and five-year warrants to purchase an aggregate of 1,400,000
shares of common stock at an exercise price of $5.00 per share.
15.
On September 7, 2010, the Company sold 50,000 shares of common stock to Mark Patterson, the Chief Executive Officer of the
Company, for aggregate gross proceeds to the Company of $250,000 under the terms of his employment agreement. This issuance of
common stock was based on a price of $5.00 per share on the date of issuance. This officer also received five-year warrants to
purchase 50,000 shares of common stock at an exercise price of $5.00 per share.
16.
On October 1, 2010, the Company entered into an amended and restated employment agreement with our Chief Executive Officer,
Mark Patterson. The amended agreement provides for a base salary of $200,000 per year and provides for a grant of an aggregate
of 1,080,000 five-year warrants with an exercise price of $5.00 per share that vest and become exercisable as follows: (i) 270,000
on October 1, 2010, (ii) 210,000 on each of February 1 and August 1, 2011 and February 1, 2012, and (iii) 180,000 on August 1,
2012. The amended agreement provides Mr. Patterson with a right of first refusal, pursuant to which Mr. Patterson has the right,
but not the obligation, to maintain his then pro rata share of the Company's issued and outstanding shares and warrants by
purchasing additional shares and warrants each time the Company offers shares and/or warrants for sale.
17.
On October 6, 2010, the Company granted ten-year non-qualified, fully vested options to the Company's President, Christopher
Mulvihill, to purchase 200,000 shares of common stock exercisable at $5.00 per share under the terms of his employment agreement.
These stock options are subject to forfeiture until service conditions associated with their grant are satisfied.
18.
On November 12, 2010, the Company issued five-year warrants to the Company's Chief Executive Officer Mark Patterson to
purchase 280,000 shares of the Company's common stock at an exercise price of $5.00 per share. These warrants were issued
in conjunction with the amendment and termination of his prior Executive employment agreement entered into during June 2010.
19.
On November 24, 2010, the Company granted options to the Company's former Chief Operating Officer, Ryan Burleson, to
purchase common stock comprised of five-year, non-qualified, fully vested options to purchase 50,000 shares exercisable at $5.00
per share. These options were forfeited in June 2011.
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5
20.
On November 24, 2010, the Company granted options to a consultant to purchase up to 5,000 shares of the Company's common
stock at an exercise price of $5.00 per share as payment for operational services. These options vest immediately and shall expire
after a period of 5 years.
21.
In November 2010, the holder (Berkowitz Wolfman Associates, Inc.) of $398,012 of outstanding indebtedness, exchanged its indebtedness
for units consisting of shares of the Company's common stock and common stock purchase warrants. The exchange was for 79,602
shares of the Company's common stock and an equal number of common stock purchase warrants to purchase shares of common stock,
which are exercisable for a period of five years at an exercise price of $5.00. The exchange was at a rate of $5.00 for one share
of common stock and one warrant.
22.
On November 30, 2010, the Company sold 33,329 shares of common stock at $6.00 per share in a private placement to two accredited
investors for cash proceeds of $200,000. These investors also received five year warrants to purchase 33,329 shares with an exercise
price of $6.00 per share.
23.
Between December 23, 2010 and December 29, 2010, the Company entered into a financing commitment letter (the "Commitment
Letter") pursuant to which it obtained a commitment for an aggregate of up to $3,250,000 of financing to be provided, upon
demand by us, by nine accredited investors, including an aggregate of up to $1,750,000 by four related parties. Under the terms
of the Commitment Letter, each lender received one five-year warrant for every dollar such lender committed, with an exercise price
of $6.00 per share. In addition, if the Company borrows under the letter, each lender will receive additional warrants at a rate
of three warrants for each dollar drawn down from that lender's commitment, with the amount of the draw down attributable to each
lender's commitment to be determined on a pro rata basis.
The related parties who committed
to provide financing under the letter are Mark Patterson, the Company's Chief Executive Officer (up to $500,000); Lake Isle
Corp., a greater than 10% holder of the Company's common stock, over which Gail Mulvihill, the mother of the Company's
President, Christopher Mulvihill, exercises sole voting and investment control (up to $750,000); HSK Funding, over which Burton
I. Koffman, a greater than 10% holder of the Company's common stock, exercises sole voting and investment control (up to
$250,000); and James Mulvihill, the son of Gail Mulvihill and brother of Christopher Mulvihill (up to $250,000).
24.
On February 11, 2011, the Company sold 142,857 shares of common stock at $7.00 per share in private placements for cash proceeds
of $1,000,000.
25.
In February and March 2011, the Company drew down a total of $2,166,664 on its line of credit of $3,250,000. In connection
with the draw down, the Company issued five-year warrants to purchase 325,000 shares of common stock at an exercise price of $6.00
per share, including a total of 175,000 warrants issued to four related parties.
26
In May 2011, the Company drew down a total of $1,083,336 on its line of credit of $3,250,000. In connection with the draw down,
the Company issued five-year warrants to purchase 162,500 shares of common stock at an exercise price of $6.00 per share, including
a total of 87,500 warrants issued to four related parties.
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27.
The Company completed a private placement on December 9, 2011. There were three closings in the private placement. On November
1, 2011, the Company issued 6% convertible promissory notes due on November 1, 2016 in the aggregate principal amount of approximately
$9.4 million and warrants to purchase 2,199,902 shares of common stock. On November 1, 2011, the Notes were convertible into an
initial aggregate amount of 2,199,902 shares of Common Stock. On November 1, 2011, the Company paid a placement agent a cash fee
of $137,306 for its services as placement agent and issued to the placement agent warrants to purchase 61,177 shares of Common
Stock. On November 18, 2011, the Company issued 6% convertible promissory notes due on November 1, 2016 in the aggregate principal
amount of approximately $1.35 million and warrants to purchase 317,652 shares of common stock. On November 18, 2011, the Notes
were convertible into an initial aggregate amount of 317,652 shares of Common Stock. On November 18, 2011, the Company paid a placement
agent a cash fee of $59,883 for its services as placement agent and issued to the placement agent warrants to purchase 27,293 shares
of Common Stock. The notes and warrants have a term of five year term. On December 9, 2011, the Company issued 6% convertible promissory
notes due on November 1, 2016 in the aggregate principal amount of $925,000 and warrants to purchase 217,652 shares of common stock.
On December 9, 2011, the Notes were convertible into an initial aggregate amount of 217,652 shares of Common Stock. On December
9, 2011, the Company paid a placement agent a cash fee of $46,800 for its services as placement agent and issued to the placement
agent warrants to purchase 20,706 shares of Common Stock. The notes and warrants have a term of five year term. The exercise price
of the warrant and the conversion price of the note is $4.25, subject to adjustment. In connection with the private placement,
the Company received cash proceeds of approximately $5.0 million and refinanced approximately $6.6 million of then existing short-term
indebtedness.
28.
In March 2012, the Company issued an aggregate amount of 25,484 shares to the holders of the 6% convertible promissory notes
due 2016 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $108,229.
29.
In April 2012, the Company granted to David Koch, Chief Operating Officer of the Company, 11,765 shares of restricted stock
pursuant to his employment agreement with the Company.
30.
In June 2012, the Company issued an aggregate amount of 40,925 shares to the holders of the 6% convertible promissory notes
due 2016 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $173,890.
31.
In June 2012, the Company issued an aggregate amount of 2,795 shares to the holders of the 6% convertible promissory notes
due 2017 as interest payments on such notes in lieu of a cash payment in the aggregate amount of $13,151.
32.
The Company completed a private placement on July 13, 2012. There were two closings in the private placement. On June 14, 2012,
the Company issued 6% convertible promissory notes due on June 14, 2017 in the aggregate principal amount of $5.0 million and warrants
to purchase 1,000,000 shares of common stock. On June 14, 2012, the Notes were convertible into an initial aggregate amount of
1,000,000 shares of Common Stock. On June 14, 2012, the Company paid a placement agent and registered broker-dealer a cash fee
of $267,302 for services and issued to the placement agent warrants to purchase 41,700 shares of Common Stock. On July 13, 2012,
the Company issued 6% convertible promissory notes due 2017 in the aggregate principal amount of $1.2 million and warrants to purchase
240,000 shares of common stock. On July 13, 2012, the Notes were convertible into an initial aggregate amount of 240,000 shares
of Common Stock. On July 13, 2012, the Company paid a placement agent and a registered broker-dealer a cash fee of approximately
$79,375 for its services and issued to the placement agent warrants to purchase 13,100 shares of Common Stock. The notes and warrants
expire on June 14, 2017. The notes and warrants terminate on June 14, 2017. The exercise price of the warrant and the conversion
price of the note is $5.00, subject to adjustment. In connection with the private placement, the Company received cash proceeds
of approximately $5.5 million.
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7
The securities sold described above were
sold upon the exemption from the registration requirements of the Securities Act of 1933, as amended, upon reliance on Section
4(2) thereof and/or regulation D promulgated thereunder. No underwriters were employed in any of these transactions. A placement
agent was paid a fee as described in item 27 and 29. 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.
Item 16.            Exhibits
and Financial Statement Schedules
Exhibit
Number
Exhibits
        and Financial Statement Schedules
3.1
Certificate of Incorporation of Registrant, as amended(15)
3.2
Second Amendment and Restated By-laws of Registrant (2)
4.1
Specimen Common Stock Certificate, $0.001 par value(1)
5.1*
Opinion of Blank Rome LLP
10.3
Form of 12% Promissory Note due August 14 and 20, 2009 (3)
10.4
Form of Warrant to Purchase Common Stock expiring August 2013 (4)
10.5
Lease agreement by and between NYC Skyline Realty LLC and Boomerang Systems, Inc. dated as of January 1, 2009. (5)
10.6
Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp. (5)
10.7
Form of Common Stock Purchase Warrant issued and to be issued with respect to payment defaults on our 12% Promissory Notes (6)
10.8
Form of Agreement used to exchange 12%  promissory notes for shares of common stock (7)
10.9
Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of August 21, 2010 (8)
10.10
Amended and Restated Executive Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of October 1, 2010 (9)
10.11
Lease agreement by and between SB&G Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008, and Amendment No. 2 thereto dated March 15, 2010 (10)
10.12
Lease agreement by and between Stan Checketts Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008 and Amendment No. 2 thereto dated March 15, 2010 (10)
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8
10.13
Ground lease by and between Route 94 Development Corporation and Boomerang Systems, Inc. dated as of April 30, 2010 (10)
10.14
Revolving Promissory Note between Sail Energy, LLC and Boomerang Systems, Inc. dated as of May 14, 2010 and Amendment No. 1 thereto dated as of December 15, 2010. (10)
10.15
Loan agreement by and between SB&G Properties and Zions First National Bank and Guaranty of such loan provided by Boomerang Systems, Inc dated July 9, 2007. (10)
10.16
Promissory Note dated May 1, 2008 between Boomerang Sub, Inc. and J and A Financing and Amendment thereto dated July 15, 2008 and modification thereto dated February 9, 2010. (10)
10.17
Assignment of deposit account by and between J and A Financing, Inc. Boomerang Systems, Inc. and Highlands State Bank dated May 16, 2010 and confirmation of payment dated July 21, 2010. (10)
10.18
Loan assumption agreement Between Boomerang Systems, Inc. and J and A Financing, Inc. dated July 6, 2010.  (10)
10.19
Promissory Note between James Mulvihill and Boomerang Systems, Inc. and conversion agreement dated March 29, 2010. (10)
10.20
Non-Compete Agreement by and between Stan Checketts and Digital Imaging Resources, Inc. dated December 10, 2007 (10)
10.21
Line of Credit in favor of Boomerang Systems, Inc. with Highlands State Bank, dated June 30, 2011 (11)
10.22
Commitment letter dated December 29, 2010, by and between Boomerang Systems, Inc. and the lenders signatory thereto. (12)
10.23
Form of Warrant issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc. and the lenders signatory thereto. (13)
10.24
Form of Note issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc., and the lenders signatory thereto. (11)
10.25
Promissory Note with Highlands State Bank, dated August 4, 2011 (11)
10.26
Chris Mulvihill employment agreement dated March 31, 2008 and amendment #1 dated October 2010 (11)
10.27
Ground Lease with Route 94, dated April 30, 2010 (12)
10.28
Equipment Lease with M&T Bank, dated September 1, 2007 and personal guarantees of the lease (11)
10.29
Boomerang loans with third party bank, due in May 2011, J and A assumption of Boomerang loans, and conversion of J and A debt to common stock (11)
10.30
Promissory Note with Gail Mulvihill, dated April 8, 2010 (11)
10.31
Promissory Note with Venturetek, dated July 9, 2010 (11)
10.32
Form of 6% Convertible Subordinate Note due 2016 (13)
10.33
Form of Warrant (13)
10.34
Form of Placement Agent Warrant (13)
10.35
Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (13)
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9
10.36
Form of Subscription Agreement (13)
10.37
Employment Agreement between David K. Koch and Boomerang Systems, Inc., dated as of October 28, 2011 (1)
10.38
Loan dated September 21, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.39
Loan dated September 22, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.40
Loan dated September 26, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.41
Loan dated September 29, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.42
Loan Agreement between Mark R. Patterson and Boomerang Systems, Inc. dated November 1, 2011. (16)
10.43
Third Amendment to the Lease between Stan Checketts Properties, L.C. and Boomerang Sub, Inc. dated October 28, 2011. (16)
10.44
Third Amendment to the Lease between SB&G Properties, LC and Boomerang Sub, Inc. dated October 1, 2011. (16)
10.45
Lease between Thirty Vreeland Associates, L.L.C. and Boomerang Systems, Inc. dated December 1, 2011. (16)
10.46
Loan Agreement between Lake Isle Corporation and Boomerang Systems, Inc. dated October 28, 2011. (16)
10.47
Loan Agreement between Atlantic & Madison of NJ  Corp. and Boomerang Systems, Inc. dated October 31, 2011. (16)
10.48
Form of 6% Convertible Subordinate Note due 2017 (17)
10.49
Form of Warrant (17)
10.50
Form of Placement Agent Warrant (17)
10.51
Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (17)
10.53
Form of Subscription Agreement (17)
10.54
Joint Venture Agreement between Boomerang MP Holdings and Stokes Industries *
14.1
Code of Ethics (14)
21.1
Subsidiaries of the Registrant as of September 30, 2011 (1)
23.1*
Consent of Blank Rome LLP (included in exhibit 5.1)
23.2*
Consent of Liebman Goldberg & Hymowitz, LLP
24.1
Power of Attorney (included on signature page)
101
The following materials from Boomerang System, Inc.'s Registration Statement on Form S-1 formatted in extensible Business Reporting Language (XBRL): (i) Unaudited, Consolidated Statements of Operations for the Nine Months Ended June 30, 2012 and 2011, (ii) Unaudited, Consolidated Balance Sheets as of June 30, 2012 and September 30, 2011, (iii) Unaudited, Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2012 and 2011, (iv) Notes to Unaudited, Consolidated Financial Statements; (v) Consolidated Statements of Operations for the Years Ended September 31, 2011 and 2010, (vi) Consolidated Balance Sheets as of September 30, 2011 and 2010, (vii) Consolidated Statements of Cash Flows for the Years Ended September 30, 2011 and 2010, (viii) Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended September 39, 2010, 2009 and 2008 and (ix) Notes to Consolidated Financial Statements.***
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10
(1)
Incorporated by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended
September 30, 2011.
(2)
Incorporated by reference from an exhibit filed with Quarterly Report on Form 10-Q for quarter ended December 31, 2009.
(3)
Incorporated by reference from an exhibit filed with the Company's annual report Form 10-K/A for the fiscal year ended
September 30, 2008.
(4)
Incorporated by reference from an exhibit filed with the Company's annual report on Form 10-K/A for the fiscal year ended
September 30, 2008.
(5)
Incorporated by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended
September 30, 2009.
(6)
Incorporated by reference from an exhibit filed with the Company's current report on Form 8-K filed on October 27, 2009
(7)
Incorporated by reference from an exhibit filed with the Company's current report on Form 8-K filed on December 21, 2009
(8)
Incorporated by reference from an exhibit filed with the Company's current report on Form 8-K/A filed on August 26, 2010
(9)
Incorporated by reference from an exhibit filed with the Company's current report on Form 8-K filed on October 7, 2010
(10)
Incorporated by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended
September 30, 2010.
(11)
Incorporated by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the quarter ended
June 30, 2011 filed on September 14, 2011.
(12)
Incorporated by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the quarter ended
June 30, 2011 filed on December 16, 2011.
(13)
Incorporated by reference from an exhibit filed with the Company's current report Form 8-K filed on December 15, 2011.
(14)
Incorporated by reference from an amendment as an exhibit filed with the Company's Current Report on Form 8-K filed December
28, 2009.
(15)
Incorporated by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2012 filed on August 14, 2012.
(16)
Incorporated by reference from an exhibit filed with the Company's Registration Statement on Form S-1 (file no. 333-179226)
filed on January 27, 2012.
(17)
Incorporated by reference from an exhibit filed with the Company's Current Report on Form 8-K filed on July 18, 2012.
*
Filed herewith
**
Pursuant to Rule 406T of Regulation S-T, the interactive data files included in Exhibit 101 are deemed not filed or part of
a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed
not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability
under those sections.
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11
Item 17.            Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means
of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(5) For purposes of determining any liability
under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(6) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
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12
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Florham Park, State of New Jersey, on September 14, 2012.
BOOMERANG SYSTEMS, INC.
By:
/s/Mark Patterson
Mark Patterson
Chief Executive Officer
(Principal Executive Officer)
KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below hereby constitutes and appoints Mark Patterson and Christopher Mulvihill, and each or any
of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign this Registration Statement, and any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/Mark Patterson
Chief Executive Officer (Principal Executive
September 14, 2012
Mark Patterson
Officer) and Director
/s/Scott Shepherd
Chief Financial Officer (Principal Financial and
September 14, 2012
Scott Shepherd
Accounting Officer)
/s/Joseph R. Bellantoni
Director
September 14, 2012
Joseph R. Bellantoni
/s/Maureen Cowell
Director
September 14, 2012
Maureen Cowell
/s/Stanley Checketts
Director
September 14, 2012
Stanley Checketts
/s/Steven C.  Rockefeller, Jr.
Director
September 14, 2012
Steven C. Rockefeller, Jr.
/s/Kevin Cassidy
Director
September 14, 2012
Kevin Cassidy
/s/Anthony P Miele, III
Director
September 14, 2012
Anthony P. Miele, III
/s/Christopher Mulvihill
Director
September 14, 2012
Christopher Mulvihill
Exhibit Index
Exhibit Number
Exhibits and Financial Statement
        Schedules
3.1
Certificate of Incorporation of Registrant, as amended(15)
3.2
Second Amendment and Restated By-laws of Registrant (2)
4.1
Specimen Common Stock Certificate, $0.001 par value(1)
5.1*
Opinion of Blank Rome LLP
10.3
Form of 12% Promissory Note due August 14 and 20, 2009 (3)
10.4
Form of Warrant to Purchase Common Stock expiring August 2013 (4)
10.5
Lease agreement by and between NYC Skyline Realty LLC and Boomerang Systems, Inc. dated as of January 1, 2009. (5)
10.6
Shareholders Agreement between Tawreed Companies Representation and Boomerang USA Corp. (5)
10.7
Form of Common Stock Purchase Warrant issued and to be issued with respect to payment defaults on our 12% Promissory Notes (6)
10.8
Form of Agreement used to exchange 12%  promissory notes for shares of common stock (7)
10.9
Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of August 21, 2010 (8)
10.10
Amended and Restated Executive Employment Agreement between Mark R. Patterson and Boomerang Systems, Inc., dated as of October 1, 2010 (9)
10.11
Lease agreement by and between SB&G Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008, and Amendment No. 2 thereto dated March 15, 2010 (10)
10.12
Lease agreement by and between Stan Checketts Properties, L.C. and Boomerang Systems, Inc. dated as of October 1, 2007, Amendment No. 1 thereto dated October 1, 2008 and Amendment No. 2 thereto dated March 15, 2010 (10)
10.13
Ground lease by and between Route 94 Development Corporation and Boomerang Systems, Inc. dated as of April 30, 2010 (10)
10.14
Revolving Promissory Note between Sail Energy, LLC and Boomerang Systems, Inc. dated as of May 14, 2010 and Amendment No. 1 thereto dated as of December 15, 2010. (10)
10.15
Loan agreement by and between SB&G Properties and Zions First National Bank and Guaranty of such loan provided by Boomerang Systems, Inc dated July 9, 2007. (10)
10.16
Promissory Note dated May 1, 2008 between Boomerang Sub, Inc. and J and A Financing and Amendment thereto dated July 15, 2008 and modification thereto dated February 9, 2010. (10)
10.17
Assignment of deposit account by and between J and A Financing, Inc. Boomerang Systems, Inc. and Highlands State Bank dated May 16, 2010 and confirmation of payment dated July 21, 2010. (10)
10.18
Loan assumption agreement Between Boomerang Systems, Inc. and J and A Financing, Inc. dated July 6, 2010.  (10)
10.19
Promissory Note between James Mulvihill and Boomerang Systems, Inc. and conversion agreement dated March 29, 2010. (10)
10.20
Non-Compete Agreement by and between Stan Checketts and Digital Imaging Resources, Inc. dated December 10, 2007 (10)
10.21
Line of Credit in favor of Boomerang Systems, Inc. with Highlands State Bank, dated June 30, 2011 (11)
10.22
Commitment letter dated December 29, 2010, by and between Boomerang Systems, Inc. and the lenders signatory thereto. (12)
10.23
Form of Warrant issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc. and the lenders signatory thereto. (13)
10.24
Form of Note issued to the lenders signatory to the Commitment letter dated December 29, 2010 by and between Boomerang Systems, Inc., and the lenders signatory thereto. (11)
10.25
Promissory Note with Highlands State Bank, dated August 4, 2011 (11)
10.26
Chris Mulvihill employment agreement dated March 31, 2008 and amendment #1 dated October 2010 (11)
10.27
Ground Lease with Route 94, dated April 30, 2010 (12)
10.28
Equipment Lease with M&T Bank, dated September 1, 2007 and personal guarantees of the lease (11)
10.29
Boomerang loans with third party bank, due in May 2011, J and A assumption of Boomerang loans, and conversion of J and A debt to common stock (11)
10.30
Promissory Note with Gail Mulvihill, dated April 8, 2010 (11)
10.31
Promissory Note with Venturetek, dated July 9, 2010 (11)
10.32
Form of 6% Convertible Subordinate Note due 2016 (13)
10.33
Form of Warrant (13)
10.34
Form of Placement Agent Warrant (13)
10.35
Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (13)
10.36
Form of Subscription Agreement (13)
10.37
Employment Agreement between David K. Koch and Boomerang Systems, Inc., dated as of October 28, 2011 (1)
10.38
Loan dated September 21, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.39
Loan dated September 22, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.40
Loan dated September 26, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.41
Loan dated September 29, 2011, by and between Boomerang Systems, Inc., and Atlantic & Madison of NJ Corp. (1)
10.42
Loan Agreement between Mark R. Patterson and Boomerang Systems, Inc. dated November 1, 2011. (16)
10.43
Third Amendment to the Lease between Stan Checketts Properties, L.C. and Boomerang Sub, Inc. dated October 28, 2011. (16)
10.44
Third Amendment to the Lease between SB&G Properties, LC and Boomerang Sub, Inc. dated October 1, 2011. (16)
10.45
Lease between Thirty Vreeland Associates, L.L.C. and Boomerang Systems, Inc. dated December 1, 2011. (16)
10.46
Loan Agreement between Lake Isle Corporation and Boomerang Systems, Inc. dated October 28, 2011. (16)
10.47
Loan Agreement between Atlantic & Madison of NJ  Corp. and Boomerang Systems, Inc. dated October 31, 2011. (16)
10.48
Form of 6% Convertible Subordinate Note due 2017 (17)
10.49
Form of Warrant (17)
10.50
Form of Placement Agent Warrant (17)
10.51
Form of Registration Rights Agreement issued by and among Boomerang Systems, Inc. and the Subscribers (17)
10.53
Form of Subscription Agreement (17)
10.54
Joint Venture Agreement between Boomerang MP Holdings and Stokes Industries *
14.1
Code of Ethics (14)
21.1
Subsidiaries of the Registrant as of September 30, 2011 (1)
23.1*
Consent of Blank Rome LLP (included in exhibit 5.1)
23.2*
Consent of Liebman Goldberg & Hymowitz, LLP
24.1
Power of Attorney (included on signature page)
101
The following materials from Boomerang System, Inc.'s Registration Statement on Form S-1 formatted in extensible Business Reporting Language (XBRL): (i) Unaudited, Consolidated Statements of Operations for the Nine Months Ended June 30, 2012 and 2011, (ii) Unaudited, Consolidated Balance Sheets as of June 30, 2012 and September 30, 2011, (iii) Unaudited, Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2012 and 2011, (iv) Notes to Unaudited, Consolidated Financial Statements; (v) Consolidated Statements of Operations for the Years Ended September 31, 2011 and 2010, (vi) Consolidated Balance Sheets as of September 30, 2011 and 2010, (vii) Consolidated Statements of Cash Flows for the Years Ended September 30, 2011 and 2010, (viii) Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended September 39, 2010, 2009 and 2008 and (ix) Notes to Consolidated Financial Statements.***
(1)           Incorporated
by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended September 30,
2011.
(2)           Incorporated
by reference from an exhibit filed with Quarterly Report on Form 10-Q for quarter ended December 31, 2009.
(3)           Incorporated
by reference from an exhibit filed with the Company's annual report Form 10-K/A for the fiscal year ended September 30, 2008.
(4)           Incorporated
by reference from an exhibit filed with the Company's annual report on Form 10-K/A for the fiscal year ended September 30,
2008.
(5)           Incorporated
by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended September 30,
2009.
(6)           Incorporated
by reference from an exhibit filed with the Company's current report on Form 8-K filed on October 27, 2009
(7)           Incorporated
by reference from an exhibit filed with the Company's current report on Form 8-K filed on December 21, 2009
(8)           Incorporated
by reference from an exhibit filed with the Company's current report on Form 8-K/A filed on August 26, 2010
(9)           Incorporated
by reference from an exhibit filed with the Company's current report on Form 8-K filed on October 7, 2010
(10)        Incorporated
by reference from an exhibit filed with the Company's annual report on Form 10-K for the fiscal year ended September 30,
2010.
(11)        Incorporated
by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2011
filed on September 14, 2011.
(12)        Incorporated
by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2011
filed on December 16, 2011.
(13)        Incorporated
by reference from an exhibit filed with the Company's current report Form 8-K filed on December 15, 2011.
(14)        Incorporated
by reference from an amendment as an exhibit filed with the Company's Current Report on Form 8-K filed December 28, 2009.
(15)        Incorporated
by reference from an exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed
on August 14, 2012.
(16)        Incorporated
by reference from an exhibit filed with the Company's Registration Statement on Form S-1 (file no. 333-179226) filed on January
27, 2012.
(17)        Incorporated
by reference from an exhibit filed with the Company's Current Report on Form 8-K filed on July 18, 2012.
*
Filed herewith
**           Pursuant to Rule 406T of Regulation
S-T, the interactive data files included in Exhibit 101 are deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.