23. Impact on Previously Issued Financial Statements of Changes in Provisional Estimates of Fair Value

On May 6, 2011, the Company acquired Fenco. The Company made preliminary estimates of fair value based on its best estimates using information that it obtained as of the reporting date. Based on new information available about facts and circumstances that existed as of the acquisition date, the Company adjusted the recognition of certain assets and liabilities to the provisional amounts previously recorded in the first three quarters ended December 31, 2011. During the fourth quarter ended March 31, 2012, the Company has further adjusted the recognition of certain assets and liabilities as of that date. These adjustments to the provisional amounts previously recorded were made retrospectively to the acquisition date and adjustments were primarily related to long-term core inventory, inventory unreturned, accounts receivable reserves, and the customer core returns accrual.

The consolidated results of operations for the three months ended June 30, 2011 as previously adjusted in September 30, 2011, the retrospective impact of the adjustments, and the adjusted consolidated results of operations for the three months ended June 30, 2011 are presented in the table below:

	Three Months Ended June 30, 2011 (Unaudited)
	As Previously Reported			Adjustments			As Adjusted

Net sales	$	70,510,000		$	-		$	70,510,000
Cost of goods sold		61,182,000			2,295,000	(1)		63,477,000
Gross profit		9,328,000			(2,295,000	)		7,033,000
Operating expenses:
General and administrative		8,606,000			(297,000	) (2)		8,309,000
Sales and marketing		2,453,000			-			2,453,000
Research and development		416,000			-			416,000
Acquisition costs		404,000			-			404,000
Total operating expenses		11,879,000			(297,000	)		11,582,000
Operating income		(2,551,000	)		(1,998,000	)		(4,549,000	)
Interest expense		1,914,000			-			1,914,000
Loss before income tax expense		(4,465,000	)		(1,998,000	)		(6,463,000	)
Income tax expense		1,842,000			-			1,842,000

Net loss	$	(6,307,000	)	$	(1,998,000	)	$	(8,305,000	)
Basic net loss per share	$	(0.51	)				$	(0.68	)
Diluted net loss per share	$	(0.51	)				$	(0.68	)

Weighted average number of shares outstanding:
Basic		12,281,530						12,281,530
Diluted		12,281,530						12,281,530

The quarterly amount of amortization of the inventory step-up added to the inventory value as part of the acquisition on May 6, 2011 was reduced due to the subsequent reduction in the value of the opening step-up amount.

The quarterly amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.

The consolidated balance sheet as of June 30, 2011 as previously adjusted as of December 31, 2011, was further impacted during the fourth quarter ended March 31, 2012 by the retrospective impact of the adjustments presented in the table below:

	June 30, 2011 (Unaudited)
							Change in
	As Previously			Reclassification			Opening
	Reported			Adjustments			Valuation Estimates (1)			Adjustments			As Adjusted
ASSETS
Current assets:
Cash	$	1,275,000		$	-		$	-		$	-		$	1,275,000
Short-term investments		311,000			-			-			-			311,000
Accounts receivable — net		27,858,000			-			(2,816,000	)		-			25,042,000
Inventory— net		106,897,000			339,000			(2,709,000	)		(2,295,000	) (2)		102,232,000
Inventory unreturned		13,446,000			-			244,000			-			13,690,000
Deferred income taxes		5,715,000			-			-			-			5,715,000
Prepaid expenses and other current assets		5,353,000			(339,000	)		104,000			-			5,118,000
Total current assets		160,855,000			-			(5,177,000	)		(2,295,000	)		153,383,000
Plant and equipment — net		17,159,000			-			-			-			17,159,000
Long-term core inventory — net		175,845,000			-			6,973,000			-			182,818,000
Long-term core inventory deposit		26,248,000			-			-			-			26,248,000
Long-term deferred income taxes		1,368,000			-			-			-			1,368,000
Goodwill		40,263,000			-			28,093,000			-			68,356,000
Intangible assets — net		46,084,000			-			(22,295,000	)		297,000	(3)		24,086,000
Other assets		1,839,000			-			-			-			1,839,000
TOTAL ASSETS	$	469,661,000		$	-		$	7,594,000		$	(1,998,000	)	$	475,257,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	98,723,000		$	-		$	(39,000	)	$	-		$	98,684,000
Accrued liabilities		34,663,000			188,000			(3,317,000	)		-			31,534,000
Customer finished goods returns accrual		26,852,000			-			(3,085,000	)		-			23,767,000
Revolving loan		18,500,000			-			-			-			18,500,000
Other current liabilities		914,000			(188,000	)		1,484,000			-			2,210,000
Current portion of term loan		2,000,000			-			-			-			2,000,000
Current portion of capital lease obligations		749,000			-			-			-			749,000
Total current liabilities		182,401,000			-			(4,957,000	)		-			177,444,000
Term loan, less current portion		15,000,000			-			-			-			15,000,000
Revolving loan		47,630,000			-			-			-			47,630,000
Deferred core revenue		8,930,000			-			-			-			8,930,000
Customer core returns accrual		97,479,000			-			12,551,000			-			110,030,000
Other liabilities		1,692,000			-			-			-			1,692,000
Capital lease obligations, less current portion		372,000			-			-			-			372,000
Total liabilities		353,504,000			-			7,594,000			-			361,098,000
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued		-			-			-			-			-
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued		-			-			-			-			-
Common stock; par value $.01 per share, 20,000,000 shares authorized; 12,441,971 and 12,078,271 shares issued; 12,499,421 and 12,427,571 outstanding at June 30, 2011 and March 31, 2011, respectively		124,000			-			-			-			124,000
Treasury stock, at cost, 14,400 shares of common stock at June 30, 2011 and March 31, 2011, respectively		(89,000	)		-			-			-			(89,000	)
Additional paid-in capital		98,139,000			-			-			-			98,139,000
Additional paid-in capital-warrant		1,879,000			-			-			-			1,879,000
Accumulated other comprehensive loss		(64,000	)		-			-			-			(64,000	)
Retained earnings		16,168,000			-			-			(1,998,000	)		14,170,000
Total shareholders' equity		116,157,000			-			-			(1,998,000	)		114,159,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	469,661,000		$	-		$	7,594,000		$	(1,998,000	)	$	475,257,000

Represents the impact of the change in the opening valuation estimates on the previously adjusted consolidated balance sheet at June 30, 2011.

The amount of amortization of the inventory step-up added to the inventory value as part of the acquisition on May 6, 2011 was reduced due to the subsequent reduction in the value of the opening step-up amount.

The amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.

The consolidated results of operations for the three months ended September 30, 2011 as previously reported, the retrospective impact of the adjustments, and the adjusted consolidated results of operations for the three months ended September 30, 2011 are presented in the table below:

	Three Months Ended September 30, 2011 (Unaudited)

	As Previously Reported			Reclassification Adjustments			Adjustments			As Adjusted

Net sales	$	107,616,000		$	-		$	-		$	107,616,000
Cost of goods sold		92,344,000			-			293,000	(1)		92,637,000
Gross profit		15,272,000			-			(293,000	)		14,979,000
Operating expenses:
General and administrative		11,771,000			(17,000	)		(445,000	) (2)		11,309,000
Sales and marketing		3,197,000			-			-			3,197,000
Research and development		401,000			-			-			401,000
Acquisition costs		309,000			-			-			309,000
Total operating expenses		15,678,000			(17,000	)		(445,000	)		15,216,000
Operating income		(406,000	)		17,000			152,000			(237,000	)
Interest expense		3,389,000			-			-			3,389,000
Loss before income tax expense		(3,795,000	)		17,000			152,000			(3,626,000	)
Income tax expense		1,796,000			17,000			-			1,813,000

Net loss	$	(5,591,000	)	$	-		$	152,000		$	(5,439,000	)
Basic net loss per share	$	(0.45	)							$	(0.44	)
Diluted net loss per share	$	(0.45	)							$	(0.44	)

Weighted average number of shares outstanding:
Basic		12,451,600									12,451,600
Diluted		12,451,600									12,451,600

The quarterly amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.

The consolidated balance sheet as of September 30, 2011 as previously adjusted as of December 31, 2011, was impacted during the fourth quarter ended March 31, 2012 by the retrospective impact of the adjustments presented in the table below:

	September 30, 2011 (Unaudited)
							Change in
	As Previously			Reclassification			Opening
	Reported			Adjustments			Valuation Estimates (1)			Adjustments			As Adjusted
ASSETS
Current assets:
Cash	$	1,197,000		$	-		$	-		$	-		$	1,197,000
Short-term investments		281,000			-			-			-			281,000
Accounts receivable — net		34,352,000			-			(2,816,000	)		-			31,536,000
Inventory— net		116,241,000			339,000			(2,709,000	)		(2,588,000	) (2)		111,283,000
Inventory unreturned		14,678,000			-			244,000			-			14,922,000
Deferred income taxes		5,722,000			-			-			-			5,722,000
Prepaid expenses and other current assets		4,756,000			(342,000	)		104,000			-			4,518,000
Total current assets		177,227,000			(3,000	)		(5,177,000	)		(2,588,000	)		169,459,000
Plant and equipment — net		15,198,000			-			-			-			15,198,000
Long-term core inventory — net		186,657,000			-			6,973,000			-			193,630,000
Long-term core inventory deposit		26,473,000			-			-			-			26,473,000
Long-term deferred income taxes		1,563,000			-			-			-			1,563,000
Goodwill		40,263,000			-			28,093,000			-			68,356,000
Intangible assets — net		45,097,000			-			(22,295,000	)		742,000	(3)		23,544,000
Other assets		1,887,000			-			-			-			1,887,000
TOTAL ASSETS	$	494,365,000		$	(3,000	)	$	7,594,000		$	(1,846,000	)	$	500,110,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	115,271,000		$	-		$	(39,000	)	$	-		$	115,232,000
Accrued liabilities		18,834,000			244,000			(3,317,000	)		-			15,761,000
Customer finished goods returns accrual		26,961,000			-			(3,085,000	)		-			23,876,000
Revolving loan		37,500,000			-			-			-			37,500,000
Other current liabilities		2,494,000			(247,000	)		1,484,000			-			3,731,000
Current portion of term loan		2,000,000			-			-			-			2,000,000
Current portion of capital lease obligations		644,000			-			-			-			644,000
Total current liabilities		203,704,000			(3,000	)		(4,957,000	)		-			198,744,000
Term loan, less current portion		14,500,000			-			-			-			14,500,000
Revolving loan		47,748,000			-			-			-			47,748,000
Deferred core revenue		9,160,000			-			-			-			9,160,000
Customer core returns accrual (see Note 2)		107,399,000			-			12,551,000			-			119,950,000
Other liabilities		1,296,000			-			-			-			1,296,000
Capital lease obligations, less current portion		307,000			-			-			-			307,000
Total liabilities		384,114,000			(3,000	)		7,594,000			-			391,705,000
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued		-			-			-			-			-
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued		-			-			-			-			-
Common stock; par value $.01 per share, 20,000,000 shares authorized; 12,513,821 and 12,078,271 shares issued; 12,499,421 and 12,063,871 outstanding at September 30, 2011 and March 31, 2011, respectively		125,000			-			-			-			125,000
Treasury stock, at cost, 14,400 shares of common stock at June 30, 2011 and March 31, 2011, respectively		(89,000	)		-			-			-			(89,000	)
Additional paid-in capital		98,580,000			-			-			-			98,580,000
Additional paid-in capital-warrant		1,879,000			-			-			-			1,879,000
Accumulated other comprehensive loss		(821,000	)		-			-			-			(821,000	)
Retained earnings		10,577,000			-			-			(1,846,000	)		8,731,000
Total shareholders' equity		110,251,000			-			-			(1,846,000	)		108,405,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	494,365,000		$	(3,000	)	$	7,594,000		$	(1,846,000	)	$	500,110,000

Represents the impact of the change in the opening valuation estimates on the previously reported consolidated balance sheet at September 30, 2011.

The amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.

The consolidated results of operations for the three months ended December 31, 2011 as previously reported, the retrospective impact of the adjustments, and the adjusted consolidated results of operations for the three months ended December 31, 2011 are presented in the table below:

	Three Months Ended December 31, 2011 (Unaudited)

	As Previously Reported			Reclassification Adjustments			Adjustments			As Adjusted

Net sales	$	84,097,000		$	-		$	-		$	84,097,000
Cost of goods sold		86,455,000			-			(777,000	) (1)		85,678,000
Gross (loss) profit		(2,358,000	)		-			777,000			(1,581,000	)
Operating expenses:
General and administrative		10,589,000			11,000			(445,000	) (2)		10,155,000
Sales and marketing		3,369,000			-			-			3,369,000
Research and development		453,000			-			-			453,000
Impairment of plant and equipment		1,031,000			-			-			1,031,000
Acquisition costs		-			-			-			-
Total operating expenses		15,442,000			11,000			(445,000	)		15,008,000
Operating loss		(17,800,000	)		(11,000	)		1,222,000			(16,589,000	)
Interest expense		3,262,000			-			-			3,262,000
Loss before income tax expense		(21,062,000	)		(11,000	)		1,222,000			(19,851,000	)
Income tax expense		1,987,000			(11,000	)		-			1,976,000

Net loss	$	(23,049,000	)	$	-		$	1,222,000		$	(21,827,000	)
Basic net loss per share	$	(1.84	)							$	(1.74	)
Diluted net loss per share	$	(1.84	)							$	(1.74	)

Weighted average number of shares outstanding:
Basic		12,517,269									12,517,269
Diluted		12,517,269									12,517,269

The quarterly amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.

The consolidated balance sheet as of December 31, 2011 as previously reported, was impacted during the fourth quarter ended March 31, 2012 by the retrospective impact of the adjustments presented in the table below:

	December 31, 2011 (Unaudited)
							Change in
	As Previously			Reclassification			Opening
	Reported			Adjustments			Valuation Estimates (1)			Adjustments			As Adjusted
ASSETS
Current assets:
Cash	$	3,133,000		$	-		$	-		$	-		$	3,133,000
Short-term investments		305,000			-			-			-			305,000
Accounts receivable — net		24,887,000			54,000			(2,816,000	)		-			22,125,000
Inventory— net		123,795,000			230,000			(2,709,000	)		(1,811,000	) (2)		119,505,000
Inventory unreturned		13,043,000			-			244,000			-			13,287,000
Deferred income taxes		5,670,000			-			-			-			5,670,000
Prepaid expenses and other current assets		4,411,000			(293,000	)		104,000			-			4,222,000
Total current assets		175,244,000			(9,000	)		(5,177,000	)		(1,811,000	)		168,247,000
Plant and equipment — net		13,942,000			-			-			-			13,942,000
Long-term core inventory — net		187,475,000			-			6,973,000			-			194,448,000
Long-term core inventory deposit		26,658,000			-			-			-			26,658,000
Long-term deferred income taxes		1,617,000			-			-			-			1,617,000
Goodwill		40,263,000			-			28,093,000			-			68,356,000
Intangible assets — net		44,157,000			-			(22,295,000	)		1,187,000	(3)		23,049,000
Other assets		1,934,000			-			-			-			1,934,000
TOTAL ASSETS	$	491,290,000		$	(9,000	)	$	7,594,000		$	(624,000	)	$	498,251,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	136,422,000		$	-		$	(39,000	)	$	-		$	136,383,000
Accrued liabilities		20,345,000			271,000			(3,317,000	)		-			17,299,000
Customer finished goods returns accrual		26,910,000			-			(3,085,000	)		-			23,825,000
Revolving loan		40,500,000			-			-			-			40,500,000
Other current liabilities		2,114,000			(280,000	)		1,484,000			-			3,318,000
Current portion of term loan		2,000,000			-			-			-			2,000,000
Current portion of capital lease obligations		559,000			-			-			-			559,000
Total current liabilities		228,850,000			(9,000	)		(4,957,000	)		-			223,884,000
Term loan, less current portion		14,000,000			-			-			-			14,000,000
Revolving loan		47,713,000			-			-			-			47,713,000
Deferred core revenue		9,352,000			-			-			-			9,352,000
Customer core returns accrual		103,079,000			-			12,551,000			-			115,630,000
Other liabilities		1,120,000			-			-			-			1,120,000
Capital lease obligations, less current portion		241,000			-			-			-			241,000
Total liabilities		404,355,000			(9,000	)		7,594,000			-			411,940,000
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued		-			-			-			-			-
Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued		-			-			-			-			-
Common stock; par value $.01 per share, 20,000,000 shares authorized; 12,533,821 and 12,078,271 shares issued; 12,519,421 and 12,063,871 outstanding at December 31, 2011 and March 31, 2011, respectively		125,000			-			-			-			125,000
Treasury stock, at cost, 14,400 shares of common stock at December 31, 2011 and March 31, 2011, respectively		(89,000	)		-			-			-			(89,000	)
Additional paid-in capital		98,693,000			-			-			-			98,693,000
Additional paid-in capital-warrant		1,879,000			-			-			-			1,879,000
Accumulated other comprehensive loss		(1,201,000	)		-			-			-			(1,201,000	)
Retained earnings		(12,472,000	)		-			-			(624,000	)		(13,096,000	)
Total shareholders' equity		86,935,000			-			-			(624,000	)		86,311,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	491,290,000		$	(9,000	)	$	7,594,000		$	(624,000	)	$	498,251,000

Represents the impact of the change in the opening valuation estimates on the previously reported consolidated balance sheet at December 31, 2011.

The amount of amortization of intangible assets was reduced based on the reduction in the opening valuation provided for intangible assets acquired on May 6, 2011.