Note 2 – Restatement of Previously Issued Financial Statements

In preparation of the Annual Report, the Company concluded it should correct its accounting related to the Company’s outstanding warrants that were originally issued in 2007 (the “2007 Warrants”). The Company had initially accounted for the warrants as a component of equity but upon further evaluation of the terms of these warrants, concluded that the 2007 Warrants should be accounted for as a derivative liability. The Company’s 2007 Warrants are not indexed to the Company’s common stock because the transactions that would trigger the Anti-Dilution Adjustment Provision are not inputs to the fair value of the warrants. As a result, we should have classified the 2007 Warrants as derivative liabilities as of January 1, 2009, the date which ASC Section 815-40-15 was effective. Under this accounting treatment, we are required to measure the fair value of the 2007 Warrants at the end of each reporting period beginning in the year ended December 31, 2009, with a cumulative effect presented as of January 1, 2009, and recognize changes in the fair value for all periods beginning with January 1, 2009 in our operating results for the current period.

The following table summarizes the effect of the restatement to the Company’s financial statements for (i) its audited consolidated financial statements as of and for the years ended December 31, 2013, 2012, 2011, 2010 and 2009, including the cumulative effect as of January 1, 2009, and (ii) its unaudited condensed consolidated interim financial statements as of, and for each of the quarterly periods ended, March 31, June 30, and September 30, in the years 2014 and 2013:

	(Amounts in 000s, except share and per share data)
	As
	Previously				As
	Reported		Adjustments		Restated

Balance sheet as of September 30, 2014 (unaudited)
Warrant Liability	$	-	$	7,116	$	7,116
Additional Paid-in Capital		102,864		2,458		105,322
Accumulated Deficit		(103,348)		(9,573)		(112,921)

Three months ended September 30, 2014 (unaudited)
Change in fair value of warrant liability		-		3,428		3,428
Net income (loss)		(706)		3,428		2,723
Net income (loss) per share, basic		(0.03)		0.14		0.11
Net income (loss) per share, diluted		(0.03)		0.01		(0.02)
Weighted average common shares outstanding, diluted		25,238,412		8,252,777		33,491,189
Comprehensive income (loss)		(705)		3,429		2,724

	(Amounts in 000s, except share and per share data)
	As
	Previously				As
	Reported		Adjustments		Restated

Nine months ended September 30, 2014 (unaudited)
Change in fair value of warrant liability		-		(4,007)		(4,007)
Net loss		(2,120)		(4,007)		(6,127)
Net income (loss) per share, basic and diluted		(0.09)		(0.18)		(0.27)
Comprehensive loss		(2,121)		(4,007)		(6,128)

Balance sheet as of June 30, 2014 (unaudited)
Warrant Liability		-		10,544		10,544
Additional Paid-in Capital		102,761		2,458		105,219
Accumulated Deficit		(102,642)		(13,002)		(115,644)

Three months ended June 30, 2014 (unaudited)
Change in fair value of warrant liability		-		(4,685)		(4,685)
Net loss		(654)		(4,685)		(5,339)
Net loss per share, basic and diluted		(0.03)		(0.18)		(0.21)
Comprehensive loss		(655)		(4,685)		(5,340)

Six months ended June 30, 2014 (unaudited)
Change in fair value of warrant liability		-		(7,436)		(7,436)
Net loss		(1,414)		(7,436)		(8,850)
Net loss per share, basic and diluted		(0.06)		(0.34)		(0.40)
Comprehensive loss		(1,416)		(7,436)		(8,852)

Balance sheet as of March 31, 2014 (unaudited)
Warrant Liability		-		5,859		5,859
Additional Paid-in Capital		102,656		2,458		105,114
Accumulated Deficit		(101,988)		(8,317)		(110,305)

Three months ended March 31, 2014 (unaudited)
Change in fair value of warrant liability		-		(2,751)		(2,751)
Net loss		(760)		(2,751)		(3,511)
Net loss per share, basic and diluted		(0.04)		(0.15)		(0.19)
Comprehensive loss		(761)		(2,751)		(3,512)

Balance sheet as of December 31, 2013 (audited)
Warrant Liability		-		3,109		3,109
Additional Paid-in Capital		100,526		2,457		102,983
Accumulated Deficit		(101,228)		(5,566)		(106,794)

	(Amounts in 000s, except share and per share data)
	As
	Previously				As
	Reported		Adjustments		Restated

Year ended December 31, 2013 (audited)
Change in fair value of warrant liability		-		5,020		5,020
Net income (loss)		(3,698)		5,020		1,322
Net income (loss) per share, basic		(0.24)		0.32		0.08
Net income (loss) per share, diluted		(0.24)		0.06		(0.18)
Weighted average common shares outstanding, diluted		15,624,999		5,135,411		20,760,410
Comprehensive income (loss)		(3,700)		5,020		1,320

Balance sheet as of September 30, 2013 (unaudited)
Warrant Liability		-		7,776		7,776
Additional Paid-in Capital		100,391		2,457		102,848
Accumulated Deficit		(100,053)		(10,234)		(110,287)

Three months ended September 30, 2013 (unaudited)
Change in fair value of warrant liability		-		(1,797)		(1,797)
Net loss		(611)		(1,797)		(2,408)
Net loss per share, basic and diluted		(0.03)		(0.11)		(0.14)
Comprehensive loss		(611)		(1,797)		(2,408)

Nine months ended September 30, 2013 (unaudited)
Change in fair value of warrant liability		-		352		352
Net income (loss)		(2,523)		352		(2,171)
Net income (loss) per share, basic and diluted		(0.17)		0.02		(0.15)
Comprehensive loss		(2,525)		352		(2,173)

Balance sheet as of June 30, 2013 (unaudited)
Warrant Liability		-		5,980		5,980
Additional Paid-in Capital		100,191		2,457		102,648
Accumulated Deficit		(99,442)		(8,437)		(107,879)

Three months ended June 30, 2013 (unaudited)
Change in fair value of warrant liability		-		(608)		(608)
Net loss		(671)		(608)		(1,279)
Net loss per share, basic and diluted		(0.05)		(0.05)		(0.10)
Comprehensive loss		(673)		(608)		(1,281)

Six months ended June 30, 2013 (unaudited)
Change in fair value of warrant liability		-		2,149		2,149
Net income (loss)		(1,912)		2,149		237
Net income (loss) per share, basic		(0.14)		0.16		0.02
Net income (loss) per share, diluted		(0.14)		0.04		(0.10)
Weighted average common shares outstanding, diluted		14,556,050		5,150,160		19,706,210
Comprehensive income (loss)		(1,914)		2,149		235

	Amounts in 000s, except share and per share data)
	As
	Previously				As
	Reported		Adjustments		Restated

Balance sheet as of March 31, 2013 (unaudited)
Warrant Liability		-		5,372		5,372
Additional Paid-in Capital		96,988		2,457		99,445
Accumulated Deficit		(98,772)		(7,830)		(106,602)

Three months ended March 31, 2013 (unaudited)
Change in fair value of warrant liability		-		2,756		2,756
Net income (loss)		(1,242)		2,756		1,514
Net income (loss) per share, basic		(0.10)		0.23		0.13
Net income (loss) per share, diluted		(0.10)		0.03		(0.07)
Weighted average common shares outstanding, diluted		12,009,285		5,624,075		17,633,360
Comprehensive income (loss)		(1,242)		2,756		1,514

Balance sheet as of December 31, 2012 (audited)
Warrant Liability		-		8,129		8,129
Additional Paid-in Capital		96,847		2,457		99,304
Accumulated Deficit		(97,530)		(10,586)		(108,116)

Year ended December 31, 2012 (audited)
Change in fair value of warrant liability		-		(3,361)		(3,361)
Net loss		(3,262)		(3,361)		(6,623)
Net loss per share, basic and diluted		(0.29)		(0.30)		(0.59)
Comprehensive loss		(3,262)		(3,361)		(6,596)

Balance sheet as of December 31, 2011 (audited)
Warrant Liability		-		5,096		5,096
Additional Paid-in Capital		95,630		2,129		97,759
Accumulated Deficit		(94,268)		(7,225)		(101,493)

Year ended December 31, 2011 (audited)
Change in fair value of warrant liability		-		(4,638)		(4,638)
Net loss		(2,360)		(4,638)		(6,998)
Net loss per share, basic and diluted		(0.27)		(0.54)		(0.81)
Comprehensive loss		(2,333)		(4,638)		(6,971)

Balance sheet as of December 31, 2010 (audited)
Warrant Liability		-		458		458
Additional Paid-in Capital		91,979		2,129		94,108
Accumulated Deficit		(91,908)		(2,587)		(94,495)

	(Amounts in 000s, except share and per share data)
	As
	Previously				As
	Reported		Adjustments		Restated

Year ended December 31, 2010 (audited)
Change in fair value of warrant liability		-		5,813		5,813
Net income (loss)		(1,933)		5,813		3,880
Net income (loss) per share, basic and diluted		(0.93)		2.79		1.86

Balance sheet as of December 31, 2009 (audited)
Warrant Liability		-		6,272		6,272
Additional Paid-in Capital		91,815		2,129		93,944
Accumulated Deficit		(89,975)		(8,400)		(98,375)

Year ended December 31, 2009 (audited)
Change in fair value of warrant liability		-		(10,056)		(10,056)
Net loss		(2,026)		(10,056)		(12,082)
Net loss per share, basic and diluted		(1.06)		(5.26)		(6.32)

Balance sheet as of January 1, 2009 (audited)
Warrant Liability		-		2,107		2,107
Additional Paid-in Capital		90,375		(3,763)		86,612
Accumulated Deficit		(87,949)		1,656		(86,293)

Historically, the Company had generated net losses thus its basic and diluted earnings per share calculations were based upon the same weighted average shares due to the anti-dilution effect. Certain periods above were restated to reflect net income. As such, the diluted earnings per share calculation for those periods are calculated based upon the treasury stock method as follows:

	(restated)		(restated)		(restated)
	For the three months		For the year		For the six months
	ended September 30,		ended December 31,		ended June 30,
(amounts in 000s, except share and per share data)	2014		2013		2013

Loss per share – Basic:
Numerator for basic income (loss) per share	$	2,723	$	1,322	$	237
Denominator for basic income (loss) per share		25,238,412		15,624,999		14,556,050
Basic income (loss) per common share	$	0.11	$	0.08	$	0.02

Loss per share – Diluted:
Numerator for diluted income (loss) per share	$	2,723	$	1,322		237
Adjust: Fair value of dilutive warrants outstanding		(3,429)		(5,020)		(2,149)
Numerator for diluted income (loss) per share	$	(706)		(3,698)		(1,912)

Denominator for basic income (loss) per share		25,238,412		15,624,999		14,556,050
Plus: Incremental shares underlying warrants outstanding		8,252,777		5,135,411		5,150,160
Denominator for diluted income (loss) per share		33,491,189		20,760,410		19,706,210
Diluted income (loss) per common share	$	(0.02)	$	(0.18)	$	(0.10)

	(restated)		(restated)
	For the three months		For the year
	ended March 31,		ended December 31,
(amounts in 000s, except share and per share data)	2013		2010

Loss per share – Basic:
Numerator for basic income (loss) per share	$	1,514	$	3,880
Denominator for basic income (loss) per share		12,009,285		2,087,068
Basic income (loss) per common share	$	0.13	$	1.86

Loss per share – Diluted:
Numerator for diluted income (loss) per share	$	1,514	$	3,880
Adjust: Fair value of dilutive warrants outstanding		(2,756)		-
Numerator for diluted income (loss) per share	$	(1,242)	$	3,880

Denominator for basic income (loss) per share		12,009,285		2,087,068
Plus: Incremental shares underlying warrants outstanding		5,624,075		-
Denominator for diluted income (loss) per share		17,633,360		2,087,068
Diluted income (loss) per common share	$	(0.07)	$	1.86	⁽¹⁾

⁽¹⁾The impact of assumed exercise of warrants is not included because all of the warrants outstanding were “out of the money” during this period.