RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

12 Months Ended

Sep. 30, 2012

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS [Abstract]

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

3. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

In August 2013, we announced a delay in filing our Form 10-Q for the three and nine months ended June 30, 2013 until management resolved a complex accounting issue related to the accounting treatment for our outstanding warrants. In the same month, we announced that investors should no longer rely on our previously issued consolidated financial statements and the related independent auditors' reports for the fiscal years ended September 30, 2012 and 2011, or the quarterly financial statements for the first two quarters of fiscal 2013, or any earnings releases relating to these periods, because of errors in such financial statements.

As a result of the identification of such errors, we have undertaken a comprehensive review of our previously filed consolidated financial statements. We concluded that the warrants issued in connection with our public offering in May 2011 were incorrectly accounted for as equity and the fair value of the warrants should have been recorded as a liability. As a result, we have restated our previously reported consolidated financial statements for the years ended September 30, 2012 and 2011. The restatement adjustments resulted in a cumulative net decrease to Total shareholders' equity of $1,213 and $1,286 as of September 30, 2012 and 2011, respectively, a decrease to our previously reported net loss for the fiscal year ended September 30, 2012 of $73 and an increase in previously reported net income of $1,759 for the fiscal year ended September 30, 2011. The decrease in our net loss and increase in net income was a result of the changes in the fair value of the warrant liability that is now correctly recorded in other income (expense) as the change in fair value of warrant liability- (increase) decrease. Except as otherwise specified, all information presented in the accompanying consolidated financial statements and the related notes are presented after inclusion of all such adjustments. There was no net effect on the consolidated statements of cash flows for fiscal years 2012 and 2011 as the change in the fair value of the warrant liability is a non-cash item.

The following table summarizes the effects of the restatement adjustments, previously discussed, on the consolidated statements of operations and comprehensive income (loss) items for the years ended September 30:

	2012								2011
	As Reported			Adjustment		Restated			As Reported			Adjustment			Restated
Total revenue	$	28,208		$	-	$	28,208		$	33,144					$	33,144
Total cost of revenue		21,370			-		21,370			22,638						22,638
Gross profit		6,838			-		6,838			10,506			-			10,506
Total operating expenses		9,329			-		9,329			9,219						9,219
Restructuring charges		3,195			-		3,195			-						-
Operating income (loss)		(5,686	)		-		(5,686	)		1,287			-			1,287
Interest expense		(714	)		-		(714	)		(706	)					(706	)
Change in fair value of warrant liability - decrease		-			73		73			-			1,759			1,759
Other income		12			-		12			12			-			12
Income (loss) before income taxes		(6,388	)		73		(6,315	)		593			1,759			2,352
Income tax expense		2			-		2			50						50
Net income (loss)		(6,390	)		73		(6,317	)		543			1,759			2,302
Other comprehensive income (loss):
Foreign currency translation adjustment		(22	)		-		(22	)		(49	)		-			(49	)
Comprehensive income (loss)	$	(6,412	)	$	73	$	(6,339	)	$	494		$	1,759		$	2,253
Basic EPS	$	(0.89	)	$	0.01	$	(0.88	)	$	(0.66	)	$	(0.08	)	$	(0.74	)
Diluted EPS	$	(0.89	)	$	0.01	$	(0.88	)	$	(0.66	)	$	(0.08	)	$	(0.74	)

The following table summarizes the effects of the restatement adjustments, previously discussed, on the consolidated balance sheet items as of September 30:

	2012									2011
	As Reported			Adjustment			Restated			As Reported			Adjustment			Restated
Total assets	$	26,975		$	-		$	26,975		$	32,346					$	32,346
Total other current liabilities		11,387			-			11,387			9,847						9,847
Fair value of warrant liability		-			1,213			1,213			-			1,286			1,286
Total current liabilities		11,387			1,213			12,600			9,847			1,286			11,133
Other long-term debt		5,998			-			5,998			6,913						6,913
Total liabilities		17,385			1,213			18,598			16,760			1,286			18,046
Shareholders' equity:
Preferred Shares		1,335			-			1,335			2,135			-			2,135
Common Shares		1,871			-			1,871			1,698			-			1,698
Additional paid-in capital		20,451			(816	)		19,635			19,408			(816	)		18,592
Accumulated deficit		(14,096	)		(397	)		(14,493	)		(7,706	)		(470	)		(8,176	)
Accumulated other comprehensive income		29			-			29			51						51
Total shareholders' equity		9,590			(1,213	)		8,377			15,586			(1,286	)		14,300
Total liabilities and shareholders' equity	$	26,975		$	-		$	26,975		$	32,346		$	-		$	32,346