|6 Months Ended|
Mar. 31, 2015
|Notes to Financial Statements|
On May 5, 2015, Brio converted the remaining $132,500 of its outstanding loan into 662,500 shares of the Companys common stock. Based on the closing stock price of $0.78 per common share, the 662,500 shares will convert into approximately $517,000 of equity and the Company will recognize a gain on the conversion on the derivative liability of approximately $68,000 and a loss on extinguishment of debt of approximately $25,000 during the quarter ended June 30, 2015.
As of May 5, 2015, the Company received approximately $517,000 in net cash that was converted by Brio into 3,162,500 shares of the Companys common stock. Related to this transaction the Company recorded approximately $3,086,000 in equity, $2,218,500 in a derivative loss, $235,000 extinguishment of debt and interest expense of $115,500 over the past 12 months. In addition, Brio received a warrant to purchase 2,371,875 common shares at $0.25 per common share.
On December 11, 2014, the Company entered into a Stock Exchange Agreement (the SCRIBE Agreement) with Brittany M. Dewan as Trustee of the Derek E. Dewan Irrevocable Living Trust II dated the 27th of July, 2010, Brittany M. Dewan, individually, Allison Dewan, individually, Mary Menze, individually, and Alex Stuckey, individually (collectively, the Scribe Shareholders). The transaction was unanimously approved by written consent of the board of directors of the Company (the Board) and the holders of a majority of the Companys outstanding stock. The Scribe transaction closed on April 1, 2015. Pursuant to the terms of the SCRIBE Agreement the Company acquired 100% of the outstanding stock of Scribe Solutions Inc., (Scribe) from the Scribe Shareholders for 640,000 shares of Series A Preferred Stock (the Preferred Stock) of the Company. In addition, the Company exchanged warrants to purchase up to 6,350,000 shares of the Companys common stock, for $0.20 per share, with a term of 5 years (the Warrants), for Scribe warrants held by two individuals. The issuances of Preferred Stock and Warrants by the Company was effected in reliance on the exemptions from registration afforded by Section 4(a)(2) of the Securities Act of 1933, (the Securities Act), and Rule 506 of Regulation D promulgated thereunder.
Under the purchase method of accounting, the transaction was valued for accounting purposes at an estimated $7.5 million, which was the estimated fair value of the Company at the date of acquisition. The estimate was based on the consideration paid of 640,000 preferred shares and the 6,350,000 warrants granted. The 640,000 preferred shares are valued at approximate $6,400,000 and the 6,350,000 warrants are valued at approximately $1,100,000. The Black-Scholes option pricing model was used to value the warrants based upon an expected stock price volatility of 81.4%, a 10 year expected life of the warrant and a risk free interest rate of approximately 1.5%.
The assets and liabilities of Scribe will be recorded at their respective fair values as of the closing date of the Scribe Agreement, and the following table summarizes these values based on the estimated balance sheet at April 1, 2015, the closing date.
The intangibles will be recorded, based on the Companys estimate of fair value, which are expected to consist primarily of customer lists with an estimated life of five to ten years and goodwill. Upon completion of an independent purchase price allocation and valuation, the allocation intangible assets will be adjusted accordingly.
The following unaudited pro forma combined financial information is based on the historical financial statements of the Company and Scribe, after giving effect to the Companys acquisition of Scribe. The notes to the unaudited pro forma financial information describe the reclassifications and adjustments to the financial information presented.
The unaudited pro forma combined balance sheet for the period ended March 31, 2015 and statement of operations for the periods ended March 31, 2015 and March 31, 2014 is presented as if the acquisition of Scribe had occurred on October 1, 2013 and were carried forward through each of the periods presented.
The allocation of the purchase price used in the unaudited pro forma combined financial information is based upon the respective fair values of the assets and liabilities of Scribe as of the date on which the SCRIBE Agreement was signed.
The unaudited pro forma combined financial information is not intended to represent or be indicative of the Companys consolidated results of operations or financial position that the Company would have reported had the Scribe acquisition been completed as of the dates presented, and should not be taken as a representation of the Companys future consolidated results of operation or financial position.
The unaudited pro forma combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company included in the annual report on form 10-K for the year ended September 30, 2014.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
No definition available.