RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 Months Ended

Dec. 31, 2012

RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS [Abstract]

RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED 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 upon our previously issued consolidated financial statements and the independent auditors' reports thereon 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 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 as well as the condensed consolidated financial statements for three months ended December 31, 2012. The restatement adjustments to the full fiscal years ended September 30, 2012 and 2011 are more fully described in Note 3 to the Consolidated Financial Statements in our Form 10-K/A for the year ended September 30, 2012.

As of December 31, 2012 and September 30, 2012, respectively, the restatement adjustments resulted in a cumulative net decrease to total shareholders' equity of $1,096 and $1,213. As a result of the adjustments, we reported an increase of $117 in previously reported net income for the three months ended December 31, 2012 and an increase of $56 to previously reported net loss for the three months ended December 31, 2011. The changes in net income (loss) were a result of the changes in the fair value of the warrant liability that are now correctly recorded in other income as a change in the fair value of the liability. Except as otherwise specified, all information presented in the accompanying condensed 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 the three months ended December 31, 2012 and 2011, respectively, 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 three months ended December 31:

	2012								2011
	As Reported			Adjustment		Restated			As Reported			Adjustment			Restated
Total revenue	$	5,803		$	-	$	5,803		$	7,516		$	-		$	7,516
Total cost of revenue		3,948			-		3,948			6,034			-			6,034
Gross profit		1,855			-		1,855			1,482			-			1,482
Total operating expenses		1,553			-		1,553			2,784			-			2,784
Operating income (loss)		302			-		302			(1,302	)		-			(1,302	)
Interest expense		(165	)		-		(165	)		(189	)		-			(189	)
Change in fair value of warrant liability - (increase) decrease		-			117		117			-			(56	)		(56	)
Other income		2			-		2			-			-			-
Income (loss) before income taxes		139			117		256			(1,491	)		(56	)		(1,547	)
Income tax expense		-			-		-			-						-
Net income (loss)		139			117		256			(1,491	)		(56	)		(1,547	)
Other comprehensive income (loss):
Foreign currency translation adjustment		8			-		8			(1	)		-			(1	)
Comprehensive income (loss)	$	147		$	117	$	264		$	(1,492	)	$	(56	)	$	(1,548	)
Basic EPS	$	0.02		$	0.01	$	0.03		$	(0.21	)	$	(0.01	)	$	(0.22	)
Diluted EPS	$	0.02		$	0.01	$	0.03		$	(0.21	)	$	(0.01	)	$	(0.22	)

The following table summarizes the effects of the restatement adjustments, previously discussed, on the consolidated balance sheet items as of December 31, 2012 and September 30, 2012:

	December 31, 2012									September 30, 2012
	As Reported			Adjustment			Restated			As Reported			Adjustment			Restated
Total assets	$	25,064		$	-		$	25,064		$	26,975		$	-		$	26,975
Total other current liabilities		14,543			-			14,543			11,387			-			11,387
Fair value of warrant liability		-			1,096			1,096			-			1,213			1,213
Total current liabilities		14,543			1,096			15,639			11,387			1,213			12,600
Other long-term debt		689			-			689			5,998			-			5,998
Total liabilities		15,232			1,096			16,328			17,385			1,213			18,598
Shareholders' equity:
Preferred Shares		1,335			-			1,335			1,335			-			1,335
Common Shares		1,876			-			1,876			1,871			-			1,871
Additional paid-in capital		20,541			(816	)		19,725			20,451			(816	)		19,635
Accumulated deficit		(13,957	)		(280	)		(14,237	)		(14,096	)		(397	)		(14,493	)
Accumulated other comprehensive income		37			-			37			29						29
Total shareholders' equity		9,832			(1,096	)		8,736			9,590			(1,213	)		8,377
Total liabilities and shareholders' equity	$	25,064		$	-		$	25,064		$	26,975		$	-		$	26,975