NOTE 2-RESTATEMENT OF 2010 FINANCIAL STATEMENTS

On January 1, 2009, the Company adopted new accounting guidance Accounting Standards Codification ("ASC") 815-40, formerly EITF 07-5 "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock") that required additional analysis as to whether or not stock purchase warrants are indexed to the Company's stock, a condition that is required to attain equity accounting. Upon adoption of this guidance, the Company concluded that its previously issued stock purchase warrants should be classified as equity and therefore, the adoption of the new guidance did not have any impact on the historical financial statements or on the 2009 financial statements.

In connection with the review of certain equity transactions in 2010, the Company determined that certain stock purchase warrants issued in prior years should have been classified as derivative liabilities due to the presence of "price protection" provisions in those warrant agreements. These provisions require that the Company modify existing warrants (as to the actual number of warrants and their exercise price) in the event that the Company issues subsequent equity (or equity linked instruments) at a price below the exercise price of the existing warrants. As a result, the Company restated its 2010 financial information in its Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on April 15, 2011, to correct the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants. The financial information in this quarterly report reflects the restated financial information.

	(unaudited)			(unaudited)
Amounts in (000s)	Qtr 1 3/31/10			Qtr 2 6/30/10
Total liabilities as reported	$	12,715		$	8,594
Adjustments		1,053			1,329
Restated total liabilities & stockholders' equity	$	13.768		$	9,923
Net loss as reported	$	(3,248	)	$	(2,206	)
Adjustments		392			(276	)
Restated loss	$	(2,856	)	$	(2,482	)