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4. Restatement of Condensed Consolidated Financial Statements

3 Months Ended

Jun. 30, 2020

Accounting Changes and Error Corrections [Abstract]

Restatement of Condensed Consolidated Financial Statements

Note 4.

Restatement of Condensed Consolidated Financial Statements (unaudited)

Subsequent to filing of its Form 10-Q on August 14, 2020, the Company during the course of its review of the financial statements for September 30, 2020 identified several accounting issues which resulted in the overstatement of revenues and understatement of expenses during the three months ended June 30, 2020. These errors resulted in accounts receivable being overstated by $446,000, prepaid expenses being overstated by $123,000, accrued expenses being understated by $175,000 in the consolidated balance sheet in the Original Report. The errors further resulted in revenues being overstated by $1,487,000, cost of revenue being overstated by $779,000 and gross profit being overstated by $708,000, total operating expenses being understated by $75,000, other income (expense) being overstated $35,000, and income from discontinued operations being overstated 5,000 in the consolidated statements of comprehensive income (loss) in the Original Report. With the errors being corrected in this Amended Report, net income (loss) decreased by $753,000 to $240,000. Additionally, the changes resulted in a decrease of basic and diluted net income (loss) per common share of $0.41.

As a result, the Company restated its previously issued unaudited consolidated financial statements, included in its Amendment to the Company’s Quarterly Report on Form 10-Q/A for the three months ended June 30, 2020.

The following tables present the effects of the restatement on the Company’s condensed consolidated balance sheet as of June 30, 2020, the condensed consolidated statements of comprehensive income for the three months ended June 30, 2020 and the condensed consolidated cash flows for the three months ended June 30, 2020. In addition to the tables presented below, the Company’s accumulated deficit per the condensed consolidated statements of stockholders’ equity as of June 30, 2020 increased from ($171,253,000) to ($172,006,000) as a result of the decrease in net income from $993,000 to $240,000 for the three months ended June 30, 2020.

Condensed Consolidated Balance Sheet

		June 30, 2020
		As Originally Reported				Adjustments				As Restated
		(in thousands)				(in thousands)				(in thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	4,551			$	–			$	4,551
Accounts receivable, net			5,220				(446	)			4,774
Inventories, net			4,193				–				4,193
Prepaid expenses and other current assets			2,937				(123	)			2,814
Current portion of deferred consideration, net of discount			188				–				188
Total current assets			17,089				(569	)			16,520
Operating lease right-of-use assets			343				–				343
Property and equipment, net			372				–				372
Deferred consideration, net of discount, less current portion			779				–				779
Other assets			69				–				69
Total assets		$	18,652			$	(569	)		$	18,083

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	4,133			$	–			$	4,133
Accrued expenses and other current liabilities			743				175				918
Deferred revenue			150				–				150
Deferred revenue Invekra			46				–				46
Operating lease liabilities			135				–				135
Current portion of long-term debt			265				–				265
Total current liabilities			5,472				175				5,647
Operating lease liabilities-non-current			220				1				221
Long-term deferred revenue Invekra			240				–				240
Long-term debt			1,310				–				1,310
Total liabilities			7,242				176				7,418
Commitments and Contingencies (Note 7)
Stockholders’ Equity
Convertible preferred stock, $0.0001 par value; 714,286 shares authorized at June 30, 2020 and March 31, 2020, respectively, 0 and 1.55 shares issued and outstanding at June 30, 2020 and March 31, 2020, respectively			–				–				–
Common stock, $0.0001 par value; 24,000,000 shares authorized at June 30, 2020 and March 31, 2020, 1,966,958 and 1,777,483 shares issued and outstanding at June 30, 2020 and March 31, 2020, respectively			2				–				2
Additional paid-in capital			188,112				–				188,112
Accumulated deficit			(171,253	)			(753	)			(172,006	)
Accumulated other comprehensive loss			(5,451	)			8				(5,443	)
Total stockholders’ equity			11,410				(745	)			10,665
Total liabilities and stockholders’ equity		$	18,652			$	(569	)		$	18,083

Condensed Consolidated Statement of Comprehensive Income (Loss)

		For the Three Months Ended June 30, 2020
		As Originally Reported				Adjustments				As Restated
		(in thousands)				(in thousands)				(in thousands)

Revenues		$	7,254			$	(1,487	)		$	5,767
Cost of revenues			4,291				(779	)			3,512
Gross profit			2,963				(708	)			2,255
Operating expenses
Research and development			476				–				476
Selling, general and administrative			2,369				75				2,444
Total operating expenses			2,845				75				2,920
Income (Loss) from operations			118				(783	)			(665	)
Interest expense			(2	)			–				(2	)
Interest income			2				–				2
Other (expense) income, net			(156	)			35				(121	)
Gain on sale of assets			77				–				77
Income (loss) from continuing operations		$	39			$	(748	)		$	(709	)
Income from discontinued operations (Note 5)			954				(5	)			949
Net income		$	993			$	(753	)		$	240

Net income per share: basic
Continuing operations		$	0.02			$	(0.41	)		$	(0.39	)
Discontinued operations			0.52				–				0.52
		$	0.54			$	(0.41	)		$	0.13
Net income per share: diluted
Continuing operations		$	0.02			$	(0.40	)		$	(0.38	)
Discontinued operations			0.52				(0.01	)			0.51
		$	0.54			$	(0.41	)		$	0.13
Weighted-average number of shares used in per common share calculations: basic			1,839				–				1,839
Weighted-average number of shares used in per common share calculations: diluted			1,843				–				1,843

Other comprehensive income
Net income		$	993			$	(753	)		$	240
Foreign currency translation adjustments			159				8				167
Comprehensive income		$	1,152			$	(745	)		$	407

Condensed Consolidated Statement of Cash Flows

		For the Three Months Ended June 30, 2020
		As Originally Reported				Adjustments				As Restated
		(in thousands)				(in thousands)				(in thousands)
Cash flows from operating activities
Net income		$	993			$	(753	)		$	240
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			53				–				53
Stock-based compensation			63				–				63
Gain on sale of assets			(872	)			–				(872	)
Changes in operating assets and liabilities:
Accounts receivable			(724	)			446				(278	)
Inventories			(1,945	)			–				(1,945	)
Deferred consideration			31				–				31
Prepaid expenses and other current assets			(323	)			123				(200	)
Operating lease right-of-use assets			49				–				49
Accounts payable			1,660				–				1,660
Accrued expenses and other current liabilities			(1,122	)			175				(947	)
Operating lease liabilities			(46	)			–				(46	)
Deferred revenue			(99	)			–				(99	)
Net cash (used in) provided by operating activities			(2,282	)			(9	)			(2,291	)

Cash flows from investing activities:
Purchases of property and equipment			(52	)			–				(52	)
Deposits			(4	)			–				(4	)
Proceeds from sale of assets			610				–				610
Net cash provided by (used in) investing activities			554				–				554

Cash flows from financing activities:
Proceeds from exercise of common stock purchase warrants			1,490				–				1,490
Proceeds from new debt			1,310				–				1,310
Principal payments on capital leases			–				–				–
Principal payments on long-term debt			(216	)			–				(216	)
Net cash provided by (used in) financing activities			2,584				–				2,584
Effect of exchange rate on cash and cash equivalents			4				9				13
Net increase in cash and cash equivalents			860				–				860
Cash and cash equivalents, beginning of period			3,691				–				3,691
Cash and cash equivalents, end of period		$	4,551			$	–			$	4,551

Supplemental disclosure of cash flow information:
Cash paid for interest		$	2			$	–			$	2