Note 3 — Restatement of Financial Statements

The Company restated as a result of an error in its financial statements in accordance with the provisions of ASC Topic 250, Accounting Changes and Error Corrections. In accordance with the disclosure provisions of ASC 250 requires a company that corrects for an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings in the statement of financial position, as of the beginning of the earliest period presented.

As previously disclosed on July 17, 2012, in a Current Report on Form 8-K, the Company’s Audit Committee determined that the Company’s consolidated financial statements on Form 10-K for the periods ended December 31, 2010 and December 31, 2011, and quarterly report on Form 10-Q for the period ended March 31, 2012, could no longer be relied upon due to concerns regarding improper revenue recognition. The Audit Committee came to this conclusion based on the results of a partial internal review conducted by the Company’s management which was completed on July 13, 2012. Under the supervision of a subcommittee of the Audit Committee and with the assistance of outside counsel and forensic accountants, a detailed investigation was performed (the “Investigation”) during which it was discovered that the issues relating to improper revenue recognition began in 2008. This determination was reported in a Current Report on Form 8-K filed on December 21, 2012. The Investigation found that certain individuals, including members of its accounting and operations staff, working together, circumvented its internal controls by obtaining or modifying documents in a fraudulent manner in order to recognize revenue earlier that appropriate and in some instances to support revenue that was not associated with valid customer contracts.

The Company, with the assistance of outside forensic accountants, investigative attorneys and its auditors, has completed a detailed review and analysis of all material revenue transactions for the period from January 1, 2008 through December 31, 2012. As a result of this review and analysis, it determined that approximately $14.2 million of revenue was recognized where no valid customer contract existed or the amount recognized exceeded the contract value and $17.4 million of cumulative revenue through March 31, 2012 was recognized earlier than appropriate under generally accepted accounting principles. The Company has restated its financial statements to properly recognize the revenue recognized prematurely and remove the revenue that was not supported by valid customer contracts. The increase in the cumulative retained deficit through December 31, 2010, resulting from these overstatements was $2.6 million. As of December 31, 2012, all but $500 thousand of the revenue that was recognized early had been recognized properly.

Throughout this Annual Report on Form 10-K, all amounts presented from prior periods and prior period comparisons in the financial statements and footnote tables have been revised and labeled “As Restated” and reflect the balances and amounts on a restated basis.

The following tables summarize the adjustments made to our previously reported audited results for the year ended December 31, 2011:

	Consolidated Balance Sheet
	For Year Ended December 31, 2011
	Previously
	Reported			Adjustments			Restated

Current assets
Cash and cash equivalents	$	8,290		$	—		$	8,290
Restricted cash	725			—			725
Accounts receivable, net	31,201			—			31,201
Inventories	630			—			630
Costs and estimated earnings in excess of billings on uncompleted contracts	32,787			(25,316		)	7,471
Prepaid expenses and other	1,214			21			1,235
Total Current Assets	74,847			(25,295		)	49,552

Net Property and Equipment	6,736			—			6,736
Long-Term Receivables	154			—			154
Deferred Financing Costs, Net	228			—			228
Intangibles, Net	4,808			—			4,808
Goodwill	12,781			—			12,781

Total Assets	$	99,554		$	(25,295	)	$	74,259

Current liabilities
Current maturities of long-term debt	$	234		$	—		$	234
Accounts payable	21,796			(5,446		)	16,350
Accrued expenses	27,128			(22,439		)	4,689
Billings in excess of costs and estimated earnings on uncompleted contracts	1,623			12,590			14,213
Customer deposits	231			—			231
Total Current Liabilities	51,012			(15,295		)	35,717

Long-Term Debt, less current maturities	3,418			—			3,418

Total Liabilities	54,430			(15,295		)	39,135

Stockholders’ Equity
Common stock	2			—			2
Additional paid-in capital	185,402			—			185,402
Accumulated deficit	(140,280		)	(10,000		)	(150,280		)

Total Stockholders’ Equity	45,124			(10,000		)	35,124

Total Liabilities and Stockholders’ Equity	$	99,554		$	(25,295	)	$	74,259

	Statement of Operations
	For Year Ended December 31, 2011
	Previously
	Reported			Adjustments			Restated

Revenue	$	120,083		$	(20,710	)	$	99,373

Cost of sales	95,657			(13,257		)	82,400

Gross Profit	24,426			(7,453		)	16,973

Selling, general and administrative expense	28,255			(99		)	28,156
Amortization of intangibles	635			—			635
Restructuring charge	1,281			—			1,281
Impairment loss	5,846			—			5,846

Operating loss	(11,591		)	(7,354		)	(18,945		)

Other Income (Expense)
Interest income	141			—			141
Interest expense	(129		)	—			(129		)

Total other income (expense)	12			—			12

Net loss	$	(11,579	)	$	(7,354	)	$	(18,933	)

Basic and Diluted Loss Per Common Share	$	(0.49	)	$	(0.30	)	$	(0.79	)

Weighted Average Common Shares Outstanding	23,823,814			—			23,823,814

	For Year Ended December 31, 2011
	Previously
	Reported			Adjustments			Restated

Cash Flows From Operating Activities
Net Loss	$	(11,579	)	$	(7,354	)	$	(18,933	)

Adjustments to reconcile net loss to net cash used in operating activities, net of assets acquired and disposed of:
Provision for bad debts	361			—			361
Share-based compensation	2,191			—			2,191
Depreciation and amortization	1,325			—			1,325
Amortization of deferred financing costs	32			—			32
Issuance of stock and warrants in exchange for services received	6			—			6
Loss on disposition of fixed assets	107			—			107
Goodwill impairment	5,846			—			5,846
Changes in assets and liabilities, net of business acquisitions and dispositions
Accounts receivable	(4,780		)	—			(4,780		)
Inventories	368			—			368
Costs and estimated earnings in excess of billings on uncompleted contracts	(17,370		)	17,630			260
Prepaid expenses and other current assets	(229		)	1			(228		)
Accounts payable	2,653			2,187			4,840
Accrued expenses	16,758			(15,437		)	1,321
Billings in excess of costs and estimated earnings on uncompleted contracts	625			2,973			3,598
Other current liabilities	(560		)	—			(560		)

Net cash used in operating activities	(4,246		)	—			(4,246		)

Cash Flows From Investing Activities
Net proceeds from sale of property and equipment	765			—			765
Purchases of property and equipment	(5,357		)	—			(5,357		)
Decrease (increase) in restricted cash	1,188			—			1,188

Net cash used in investing activities	(3,404		)	—			(3,404		)

Cash Flows From Financing Activities
Proceeds from long-term debt	3,600			—			3,600
Payments of long-term debt	(481		)	—			(481		)
Debt issuance costs	(260		)	—			(260		)
Proceeds from issuance of shares for benefit plans	65			—			65

Net cash provide by (used in) financing activities	2,924			—			2,924

Net (Decrease) Increase in Cash and Cash Equivalents	(4,726		)	—			(4,726		)

Cash and Cash Equivalents, at beginning of period	13,016			—			13,016

Cash and Cash Equivalents, at end of period	$	8,290		$	—		$	8,290

The following tables summarize the adjustments made to our previously reported audited results for the year ended December 31, 2010:

	Consolidated Balance Sheet
	For Year Ended December 31, 2010
	Previously
	Reported			Adjustments			Restated

Current assets
Cash and cash equivalents	$	13,016		$	—		$	13,016
Restricted cash	1,913			—			1,913
Accounts receivable, net	26,393			—			26,393
Inventories	998			—			998
Costs and estimated earnings in excess of billings on uncompleted contracts	15,417			(7,685		)	7,732
Prepaid expenses and other	985			1			986
Total Current Assets	58,722			(7,684		)	51,038

Net Property and Equipment	2,940			—			2,940
Long-Term Receivables	543			—			543
Intangibles, Net	5,444			—			5,444
Goodwill	18,627			—			18,627

Total Assets	$	86,276		$	(7,684	)	$	78,592

Current liabilities
Current maturities of long-term debt	$	115		$	—		$	115
Accounts payable	19,143			(7,633		)	11,510
Accrued expenses	10,370			(7,022		)	3,348
Billings in excess of costs and estimated earnings on uncompleted contracts	998			9,617			10,615
Customer deposits	791			—			791
Total Current Liabilities	31,417			(5,038		)	26,379

Long-Term Debt, less current maturities	418			—			418

Total Liabilities	31,835			(5,038		)	26,797

Stockholders’ Equity
Common stock	2			—			2
Additional paid-in capital	183,140			—			183,140
Accumulated deficit	(128,701		)	(2,646		)	(131,347		)

Total Stockholders’ Equity	54,441			(2,646		)	51,795

Total Liabilities and Stockholders’ Equity	$	86,276		$	(7,684	)	$	78,592

	Statement of Operations
	For Year Ended December 31, 2010
	Previously
	Reported			Adjustments			Restated

Revenue	$	95,718		$	(12,377	)	$	83,341

Cost of sales	74,657			(9,115		)	65,542

Gross Profit	21,061			(3,262		)	17,799

Selling, general and administrative expense	25,883			(130		)	25,753
Amortization of intangibles	589			—			589

Operating loss	(5,411		)	(3,132		)	(8,543		)

Other Income (Expense)
Interest income	205			—			205
Interest expense	(33		)	—			(33		)

Total other income (expense)	172			—			172

Net loss	$	(5,239	)	$	(3,132	)	$	(8,371	)

Basic and Diluted Loss Per Common Share	$	(0.22	)	$	(0.13	)	$	(0.35	)

Weighted Average Common Shares Outstanding	23,622,028			—			23,622,028

	Statement of Cash Flows
	For Year Ended December 31, 2010
	Previously
	Reported			Adjustments			Restated

Cash Flows From Operating Activities
Net Loss	$	(5,239	)	$	(3,132	)	$	(8,371	)

Adjustments to reconcile net loss to net cash used in operating activities, net of assets acquired and disposed of:
Provision for bad debts	33			—			33
Share-based compensation	1,325			—			1,325
Depreciation and amortization	1,095			—			1,095
Issuance of stock and warrants in exchange for services received	8			—			8
Loss on disposition of fixed assets	11			—			11
Changes in assets and liabilities, net of business acquisitions and dispositions
Accounts receivable	(7,094		)	—			(7,094		)
Inventories	(768		)	—			(768		)
Costs and estimated earnings in excess of billings on uncompleted contracts	(9,885		)	8,760			(1,125		)
Prepaid expenses and other current assets	(233		)	(1		)	(234		)
Accounts payable	10,719			(5,848		)	4,871
Accrued expenses	5,478			(3,516		)	1,962
Billings in excess of costs and estimated earnings on uncompleted contracts	364			3,737			4,101
Other current liabilities	(8		)	—			(8		)

Net cash used in operating activities	(4,194		)	—			(4,194		)

Cash Flows From Investing Activities
Purchase of gas rights	(2,650		)	—			(2,650		)
Net proceeds from sale of property and equipment	16			—			16
Purchases of property and equipment	(1,557		)	—			(1,557		)
Decrease (increase) in restricted cash	(1,413		)	—			(1,413		)

Net cash used in investing activities	(5,604		)	—			(5,604		)

Cash Flows From Financing Activities
Payments of long-term debt	(198		)	—			(198		)
Proceeds from issuance of shares for benefit plans	142			—			142

Net cash provide by (used in) financing activities	(56		)	—			(56		)

Net (Decrease) Increase in Cash and Cash Equivalents	(9,854		)	—			(9,854		)

Cash and Cash Equivalents, at beginning of period	22,870			—			22,870

Cash and Cash Equivalents, at end of period	$	13,016		$	—		$	13,016

The following tables summarize the adjustments made to our previously reported audited results for the year ended December 31, 2009:

	Consolidated Balance Sheet
	For Year Ended December 31, 2009
	Previously
	Reported			Adjustments			Restated

Current assets
Cash and cash equivalents	$	22,870		$	—		$	22,870
Restricted cash	500			—			500
Accounts receivable	19,330			—			19,330
Inventories	230			—			230
Costs and estimated earnings in excess of billings on uncompleted contracts	5,532			1,075			6,607
Prepaid expenses and other	752			—			752
Total Current Assets	49,214			1,075			50,289

Net Property and Equipment	1,917			—			1,917
Long Term Receivables	545			—			545
Intangibles, net	3,382			—			3,382
Goodwill	18,627			—			18,627

Total Assets	$	73,685		$	1,075		$	74,760

Current liabilities
Lines of credit	$	—		$	—		$	—
Current maturities of long-term debt	187			—			187
Accounts payable	8,424			(1,879		)	6,545
Accrued expenses	4,892			(6,148		)	(1,256		)
Billings in excess of costs and estimated earnings on uncompleted contracts	634			5,881			6,515
Customer deposits	799			—			799
Total Current Liabilities	14,936			(2,146		)	12,790

Long-Term Debt, less current maturities	544			—			544

Total Liabilities	15,480			(2,146		)	13,334

Stockholders’ Equity
Common stock	2			—			2
Additional paid-in capital	181,665			—			181,665
Accumulated deficit	(123,462		)	3,221			(120,241		)

Total Stockholders’ Equity	58,205			3,221			61,426

Total Liabilities and Stockholders’ Equity	$	73,685		$	1,075		$	74,760

	Statement of Operations
	For Year Ended December 31, 2009
	Previously
	Reported			Adjustments			Restated

Revenue	$	70,802		$	(4,991	)	$	65,811

Cost of sales	57,192			(7,362		)	49,830

Gross Profit	13,610			2,371			15,981

Selling, general and administrative	23,940			69			24,009
Amortization of intangibles	1,221			—			1,221
Impairment loss	2,652			—			2,652

Operating loss	(14,203		)	2,302			(11,901		)

Other Income (Expense)
Interest income	137			—			137
Interest expense	(3,210		)	—			(3,210		)

Total other income (expense)	(3,073		)	—			(3,073		)

Loss from continuing operations before discontinued operations	(17,276		)	2,302			(14,974		)

Discontinued Operations:
Loss from operation of discontinued business	(1,786		)	—			(1,786		)

Loss before income taxes	(19,062		)	2,302			(16,760		)

Income tax benefit	1,034			—			1,034

Net loss	(18,028		)	2,302			(15,726		)

Preferred Dividend	(1,499		)	—			(1,499		)

Net Loss Available to Common	$	(19,527	)	$	2,302		$	(17,225	)

Basic and diluted loss per common share from continuing operations	$	(1.12	)	$	0.14		$	(0.97	)

Discontinued operations	(0.11		)	—			(0.11		)

Basic and Diluted Loss Per Common Share	$	(1.23	)	$	0.14		$	(1.08	)

Weighted Average Common Shares Outstanding (Note 3)	15,892,768			—			15,892,768

	Statement of Cash Flows
	For Year Ended December 31, 2009
	Previously
	Reported			Adjustments			Restated

Cash Flows Used in Operating Activities
Net Loss	$	(18,028	)	$	2,302		$	(15,726	)

Adjustments to reconcile net loss to net cash used in operating activities, net of assets acquired and disposed of:
Provision for bad debt	304			—			304
Share based compensation	1,803			—			1,803
Preferred stock dividends	(1,499		)	—			(1,499		)
Depreciation and amortization	1,906			—			1,906
Amortization of deferred financing costs	313			—			313
Amortization of original issue discount	1,411			—			1,411
Issuance of warrants in exchange for services received	27			—			27
Beneficial value of change in conversion price of suborinated notes	938			—			938
PIK notes issued for interest	21			—			21
Accrued interest converted to common stock	204			—			204
Accrued interest converted to preferred stock	781			—			781
Loss on disposition of fixed assets	12			—			12
Trade name impairment	2,652			—			2,652
Imapirment on disposal of Energy Technology business	503			—			503
Deferred income tax benefit	(1,034		)	—			(1,034		)
Changes in assets and liabilities, net of business acquisitions and dispositions
Accounts receivable	4,967			—			4,967
Inventories	(224		)	—			(224		)
Costs and estimated earnings in excess of billings on uncompleted contracts	(1,454		)	1,187			(267		)
Prepaid expenses and other current assets	666			—			666
Accounts payable	(7,044		)	(1,488		)	(8,532		)
Accrued liabilities	1,905			(5,807		)	(3,902		)
Billings in excess of costs and estimated earnings on uncompleted contracts	(1,324		)	3,806			2,482
Deferred revenue	(95		)	—			(95		)
Other current liabilities	(418		)	—			(418		)

Net cash used in operating activities	(12,707		)	—			(12,707		)

Cash Flows Used in Investing Activities
Acquisition (including acquisition costs), net of cash acquired	(1,047		)	—			(1,047		)
Proceeds from sale of fixed assets	11			—			11
Purchase of property and equipment	(378		)	—			(378		)
Restricted cash	(500		)	—			(500		)

Net cash used in investing activities	(1,914		)	—			(1,914		)

Cash Flows From Financing Activities
(Payments) borrowings on line of credit	(3,966		)	—			(3,966		)
Proceeds from long-term debt	27			—			27
Payments of long-term debt	(1,611		)	—			(1,611		)
Proceeds from issuance of common stock	42,301			—			42,301
Costs related to stock issuances	(3,130		)	—			(3,130		)
Proceeds from issuance shares for benefit plans	91			—			91
Proceeds from exercise of options and warrants	45			—			45

Net cash provided by financing activities	33,757			—			33,757

Net Increase (Decrease) in Cash and Cash Equivalents	19,136			—			19,136

Cash and Cash Equivalents, at beginning of period	3,734			—			3,734

Cash and Cash Equivalents, at end of period	$	22,870		$	—		$	22,870

The following tables summarize the adjustments made to our previously reported audited results for the year ended December 31, 2008:

	Consolidated Balance Sheet
	For Year Ended December 31, 2008
	Previously
	Reported			Adjustments			Restated

Current assets
Cash and cash equivalents	$	3,734		$	—		$	3,734
Accounts receivable	24,227			—			24,227
Inventories	665			—			665
Costs and estimated earnings in excess of billings on uncompleted contracts	4,078			2,261			6,339
Prepaid expenses and other	1,418			—			1,418
Total Current Assets	34,122			2,261			36,383

Net Property and Equipment	2,081			—			2,081
Long Term Receivables	1,031			—			1,031
Deferred Financing Costs	4			—			4
Intangibles, net	7,137			—			7,137
Goodwill	18,513			—			18,513

Total Assets	$	62,888		$	2,261		$	65,149

Current liabilities
Lines of credit	$	3,987		$	—		$	3,987
Current maturities of long-term debt	187			—			187
Accounts payable	15,452			(391		)	15,061
Accrued expenses	3,855			(342		)	3,513
Billings in excess of costs and estimated earnings on uncompleted contracts	1,958			2,075			4,033
Current portion of deferred revenue	358			—			358
Customer deposits	1,289			—			1,289
Total Current Liabilities	27,086			1,342			28,428

Deferred Revenue, less current portion	90			—			90
Long-Term Debt, less current maturities	5,717			—			5,717
Deferred Tax Liability	1,034			—			1,034

Total Liabilities	33,927			1,342			35,269

Stockholders’ Equity
Preferred stock	4			—			4
Common stock	1			—			1
Additional paid-in capital	134,390			—			134,390
Accumulated deficit	(105,434		)	919			(104,515		)

Total Stockholders’ Equity	28,961			919			29,880

Total Liabilities and Stockholders’ Equity	$	62,888		$	2,261		$	65,149

	Statement of Operations
	For Year Ended December 31, 2008
	Previously
	Reported			Adjustments			Restated

Revenue	$	54,975		$	(301	)	$	54,674

Cost of sales	43,281			(914		)	42,367

Gross Profit	11,694			613			12,307

Selling, general and administrative	18,100			(342		)	17,758
Amortization of intangibles	1,568			—			1,568

Operating loss	(7,974		)	955			(7,019		)

Other Income (Expense)
Interest income	87			—			87
Interest expense	(2,668		)	—			(2,668		)

Total other income (expense)	(2,581		)	—			(2,581		)

Loss from continuing operations before discontinued operations	(10,555		)	955			(9,600		)

Discontinued Operations:
Loss from operation of discontinued business	(2,480		)	—			(2,480		)

Net loss	(13,035		)	955			(12,080		)

Preferred Dividend	(288		)	—			(288		)

Net Loss Available to Common	$	(13,323	)	$	955		$	(12,368	)

Basic and diluted loss per common share from continuing operations	$	(1.29	)	$	0.11		$	(1.18	)

Discontinued operations	(0.30		)	—			(0.30		)

Basic and Diluted Loss Per Common Share	$	(1.59	)	$	0.11		$	(1.48	)

Weighted Average Common Shares Outstanding (Note 3)	8,381,697			—			8,381,697

	Statement of Cash Flows
	For Year Ended December 31, 2008
	Previously
	Reported			Adjustments			Restated

Cash Flows Used in Operating Activities
Net Loss	$	(13,035	)	$	955		$	(12,080	)

Adjustments to reconcile net loss to net cash used in operating activities, net of assets acquired and disposed of:
Provision for bad debt	128			—			128
Share based compensation	3,784			—			3,784
Preferred stock dividends	(288		)	—			(288		)
Depreciation and amortization	2,540			—			2,540
Amortization of deferred financing costs	3			—			3
Amortization of original issue discount	1,001			—			1,001
Issuance of warrants in exchange for services received	113			—			113
PIK notes issued for interest	228			—			228
Accrued interest converted to common stock	250			—			250
Accrued interest converted to preferred stock	207			—			207
Loss on disposition of fixed assets	2			—			2
Changes in assets and liabilities, net of business acquisitions and dispositions
Accounts receivable	(13,302		)	—			(13,302		)
Inventories	28			—			28
Costs and estimated earnings in excess of billings on uncompleted contracts	(2,286		)	(1,890		)	(4,176		)
Prepaid expenses and other current assets	(542		)	9			(533		)
Accounts payable	7,054			(831		)	6,223
Accrued liabilities	455			(433		)	22
Billings in excess of costs and estimated earnings on uncompleted contracts	800			2,190			2,990
Deferred revenue	(691		)	—			(691		)
Other current liabilities	107			—			107

Net cash used in operating activities	(13,444		)	—			(13,444		)

Cash Flows Used in Investing Activities
Acquisition (including acquisition costs), net of cash acquired	(3,804		)	—			(3,804		)
Proceeds from sale of fixed assets	3			—			3
Purchase of property and equipment	(403		)	—			(403		)

Net cash used in investing activities	(4,204		)	—			(4,204		)

Cash Flows From Financing Activities
(Payments) borrowings on line of credit	14,726			—			14,726
Proceeds from long-term debt	134			—			134
Payments of long-term debt	(620		)	—			(620		)
Proceeds from issuance of common stock	3,001			—			3,001
Costs related to stock issuances	(760		)	—			(760		)
Proceeds from exercise of options and warrants	120			—			120

Net cash provided by financing activities	16,601			—			16,601

Net Increase (Decrease) in Cash and Cash Equivalents	(1,047		)	—			(1,047		)

Cash and Cash Equivalents, at beginning of period	4,781			—			4,781

Cash and Cash Equivalents, at end of period	$	3,734		$	—		$	3,734