Financing Arrangements

9 Months Ended

Jun. 30, 2011

Financing Arrangements [Abstract]

Financing Arrangements

Note 5. Financing Arrangements

Debt obligations consist of the following (in thousands):

	June 30,		September 30,
	2011		2010
Capitalized leases	$	2,472	$	1,143
Contingent earn out		111		181
Total debt obligations		2,583		1,324
Less current portion of debt obligations		1,338		839
Total debt obligations, net of current portion	$	1,245	$	485

In connection with the financing of the acquisition of GeoLogic Solutions, Inc., in January 2008, the Company entered into a three-year secured credit facility with Silicon Valley Bank (SVB) consisting of a $10.0 million revolving line of credit bearing interest at a floating rate equal to 0.5% over SVB’s Prime Rate. Also in connection with the acquisition of GeoLogic Solutions, Inc., the Company entered into a four year secured credit facility consisting of an $8.0 million term loan with Partner’s for Growth II, L.P. (“PFG”) bearing interest at a fixed rate of 14.5%, subject to adjustment under various circumstances. In the first quarter of fiscal 2010 both facilities were paid in full and subsequently canceled. Also, in the first quarter of fiscal 2010, the remaining unamortized balance of the related debt financing costs of $0.5 million was charged to interest expense on financing activities.

In connection with financing the acquisition of Turnpike in December 2009, the Company issued convertible debt totaling $30.2 million. On February 19, 2010, the convertible debt converted into 10,066,663 shares of Series G preferred stock and warrants to purchase 3,019,995 common shares. The convertible debt carried an interest rate of 14% per annum. The interest expense recorded for the nine months ended June 30, 2010 was approximately $0.9 million. The Company used proceeds of the convertible debt for the purchase of Turnpike, to pay off the term loan with PFG of $8.0 million and to pay a litigation settlement. The remaining proceeds are being utilized for working capital needs and future growth.

The value of common stock relating to the Turnpike acquisition and related contingent earn outs were treated as debt until shareholder approval was received on February 17, 2010. Subsequently, these amounts were reclassified as equity. These items were re-measured at their fair value at the end of each period and on the date of shareholder approval. There were approximately $0.4 million of remeasurement charges that were recorded for the nine months ended June 30, 2010. The portion of the earn-out to be settled in cash will continue to be re-measured at fair value at the end of each period until settlement.

In connection with the acquisition of Turnpike, the Company acquired a Master Lease Agreement with Buffalo City Center Leasing, LLC (“BCCL”) effective October 1, 2007 for financing of certain equipment used in the Turnpike product offerings. Leases under the Master Lease Agreement have a term of twenty seven months and effective interest rates of between 16.1% and 16.5% with monthly payments including principal and interest. The Master Lease Agreement expired on October 4, 2010. The Company entered into the First Amendment to the Master Lease Agreement (the Amendment) on January 7, 2011, which extended the term of the Master Lease Agreement through the end of the lease term of any equipment leased under the Master Lease Agreement. Effective June 17, 2011, the Company entered into a second Master Lease Agreement with BCCL for the financing of additional equipment used in the Turnpike product offerings. Leases under the second Master Lease Agreement have a term of twenty-one months and an effective interest rate of 14.3% with monthly payments including principal and interest. The second Master Lease Agreement extends for three years or through the end of the lease term of any equipment leased under the Master Lease Agreement.

The balance of the Company’s capital lease obligation with BCCL was $2.5 million at June 30, 2011.