(15) Restatement of Financial Statements

The Company’s Board of Directors, based on the recommendation of the Audit Committee of the Company’s Board of Directors and consulation with management, concluded that the previously issued interim consolidated financial statements contained in Form 10-Q for the quarterly period ended September 30, 2013 should no longer be relied upon and must be restated to correct an error related to the valuation of the Company’s common stock warrant liability as of September 30, 2013.

As of September 30, 2013, there were 621,275 warrants outstanding with an exercise price of $12.16 and an expiration date of April 30, 2015 that are classified as liability instruments in the Company’s consolidated balance sheet and are remeasured at fair value each reporting period. Management estimates the fair value of the common stock warrant liability each reporting period using the Black-Scholes option pricing model and input assumptions such as: the Company’s common stock price on the applicable measurement date; the exercise price of the common stock warrants; remaining contractual term; risk-free interest rate; and historical volatility.

Following a review of the Original Financial Statements, the Company discovered a calculation error related to the valuation of the common stock warrant liability as of September 30, 2013 that was previously reported. This error resulted in the overstatement of the common stock warrant liability recorded in the consolidated balance sheet as of September 30, 2013 and overstatement of the associated expense recognized in the consolidated statements of operations for the change in the fair value of the common stock warrant liability recognized for the three and nine month periods ended September 30, 2013.

As a result, the Company has restated its consolidated balance sheet to reflect the corrected value of the common stock warrant liability as of September 30, 2013 and its consolidated statements of operations to correct the amounts recognized for the change in fair value of common stock warrants for the three and nine month periods ended September 30, 2013. The Company also restated its consolidated statements of comprehensive income (loss) for the three and nine month periods ended September 30, 2013 and the consolidated statement of cash flows for the nine month period ended September 30, 2013 to conform to the changes made in the consolidated balance sheet and statements of operations. As a result of this misstatement, net income was understated by $4.9 million for the three and nine month periods ended September 30, 2013.

This restatement has resulted in certain adjustments to our financial statements which are illustrated in detail below.


	September 30, 2013
	As Previously Reported			Adjustment			As Restated
Consolidated Balance Sheet:
Common stock warrant liability	$	5,568,525		$	(4,872,460	)⁽¹⁾	$	696,065
Total liabilities		18,180,455			(4,872,460	)		13,307,995
Accumulated deficit		(247,621,276	)		4,872,460			(242,748,816	)
Total shareholders’ equity		41,050,241			4,872,460			45,922,701


	Three Months Ended September 30, 2013
	As Previously Reported			Adjustment			As Restated
Consolidated Statement of Operation:
Change in fair value of common stock warrants	$	(4,444,804	)	$	4,872,460		$	427,656
(Loss) income before income taxes		(3,151,693	)		4,872,460			1,720,767
Net (loss) income		(3,154,317	)		4,872,460			1,718,143
Basic net (loss) income per common share	$	(0.28	)	$	0.43		$	0.15
Diluted net (loss) income per common share	$	(0.28	)	$	0.39		$	0.11
Basic weighted average common shares outstanding		11,137,780			—			11,137,780
Diluted weighted average common shares outstanding		11,137,780			155,249	⁽²⁾		11,293,029

Consolidated Statement of Comprehensive (Loss) Income:
Net (loss) income	$	(3,154,317	)	$	4,872,460		$	1,718,143
Comprehensive (loss) income		(2,516,607	)		4,872,460			2,355,853


	Nine Months Ended September 30, 2013
	As Previously Reported			Adjustment			As Restated
Consolidated Statement of Operations:
Change in fair value of common stock warrants	$	(4,394,778	)	$	4,872,460		$	477,682
Income before income taxes		752,378			4,872,460			5,624,838
Net income		744,204			4,872,460			5,616,664
Basic net income per common share	$	0.07		$	0.44		$	0.51
Diluted net income per common share	$	0.07		$	0.39		$	0.46
Basic weighted average common shares outstanding		10,994,382			—			10,994,382
Diluted weighted average common shares outstanding		11,148,275			—			11,148,275

Consolidated Statement of Comprehensive Income:
Net income	$	744,204		$	4,872,460		$	5,616,664
Comprehensive income		1,282,762			4,872,460			6,155,222

Consolidated Statements of Cash Flows Data:
Net income	$	744,204		$	4,872,460		$	5,616,664
Change in fair value of common stock warrants		4,394,778			(4,872,460	)		(477,682	)

(1)	Represents the common stock warrant liability adjustment as of September 30, 2013.

(2)	Represents the effect of dilutive securities change to the diluted weighted average common shares outstanding due to the three months ended September 30, 2013 resulting changing from a net (loss) to a net income.