RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In August 2013, we announced the 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 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 and six months ended March 31, 2013. 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. The restatement adjustments to the three months ended December 31, 2012 and 2011 are more fully described in Note 2 to the condensed consolidated financial statements on our Form 10-Q/A for the quarterly period ended December 31, 2012. The restatement adjustments to the three and six months ended March 31, 2013 and 2012 are more fully described in Note 2 to the condensed consolidated financial statements in our Form 10-Q/A for the quarterly period ended March 31, 2013.

As of September 30, 2012, the restatement adjustments resulted in a cumulative net decrease to total shareholders' equity of $1,213. As a result of the adjustments, we reported a decrease of $458 to previously reported net loss for the three and nine months ended June 30, 2012. The changes in net loss were a result of the changes in the fair value of the warrant liability that is now correctly recorded in other income (expense). 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 and nine months ended June 30, 2013 and 2012, 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 and nine months ended June 30, 2012:

	Three months ended June 30, 2012								Nine months ended June 30, 2012
	As Reported			Adjustment		Restated			As Reported			Adjustment		Restated
Total revenue	$	7,186		$	-	$	7,186		$	21,668				$	21,668
Total cost of revenue		5,127			-		5,127			16,984					16,984

Gross profit		2,059			-		2,059			4,684			-		4,684

Total operating expenses		1,976			-		1,976			7,544					7,544
Restructuring charges		623			-		623			687			-		687

Operating income (loss)		(540	)		-		(540	)		(3,547	)		-		(3,547	)

Interest expense		(172	)		-		(172	)		(540	)				(540	)
Change in fair value of warrant liability - decrease		-			458		458			-			458		458
Other income		8			-		8			8			-		8

Income (loss) before income taxes		(704	)		458		(246	)		(4,079	)		458		(3,621	)

Income tax expense		-			-		-			-					-

Net income (loss)		(704	)		458		(246	)		(4,079	)		458		(3,621	)

Other comprehensive income (loss):
Foreign currency translation adjustment		(17	)		-		(17	)		4			-		4

Comprehensive income (loss)	$	(721	)	$	458	$	(263	)	$	(4,075	)	$	458	$	(3,617	)

Basic EPS	$	(0.10	)	$	0.07	$	(0.03	)	$	(0.58	)	$	0.07	$	(0.51	)
Diluted EPS	$	(0.10	)	$	0.07	$	(0.03	)	$	(0.58	)	$	0.07	$	(0.51	)

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

	September 30, 2012
	As Reported			Adjustment			Restated

Total assets	$	26,975					$	26,975

Total other current liabilities		11,387						11,387
Fair value of warrant liability		-			1,213			1,213
Total current liabilities		11,387			1,213			12,600

Other long-term debt		5,998						5,998

Total liabilities		17,385			1,213			18,598

Shareholders' equity:
Preferred Shares		1,335			-			1,335
Common Shares		1,871			-			1,871
Additional paid-in capital		20,451			(816	)		19,635
Accumulated deficit		(14,096	)		(397	)		(14,493	)
Accumulated other comprehensive income		29						29
Total shareholders' equity		9,590			(1,213	)		8,377

Total liabilities and shareholders' equity	$	26,975		$	-		$	26,975