| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| NEVADA                          | 87-0267292          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

| Large accelerated filer o | Accelerated filer o                      | Non-accelerated filer o | Smaller reporting company þ |
|--------------------------------|-----------------------------------------------|------------------------------|---------------------------------------|
|                           | (Do not check if a smaller reporting company) |

| Class               |   | Outstanding as of May 5, 2010 |
|---------------------|--------|------------------------------------|
| Common Stock, $.001 |   | 39,198,333                         |

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|                                |                                                                                                   | Page   |
|-------------------------------------|--------------------------------------------------------------------------------------------------------|--------|
| Explanatory Note                    | 3                                                                                                      |
|                                |                                                                                                   |   |
| PARTI — FINANCIAL INFORMATION | 4                                                                                                      |
|                                |                                                                                                   |   |
| Item 1.                             | Condensed Consolidated Financial Statements                                                            | 4      |
|                                |                                                                                                   |   |
|                                | Balance Sheets as of March 31, 2010 (unaudited) and September 30, 2009                                 | 4      |
|                                |                                                                                                   |   |
|                                | Statements of Operations for the three and six months ended March 31, 2010 and 2009 (unaudited)        | 5      |
|                                |                                                                                                   |   |
|                                | Statement of Changes in Stockholders’ Equity for the six months ended March 31, 2010 (unaudited) | 6      |
|                                |                                                                                                   |   |
|                                | Statements of Cash Flows for the six months ended March 31, 2010 and 2009 (unaudited)                  | 7      |
|                                |                                                                                                   |   |
|                                | Notes to Unaudited Condensed Consolidated Financial Statements                                         | 8      |
|                                |                                                                                                   |   |
| Item 2.                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations            | 25     |
|                                |                                                                                                   |   |
| Item 3.                             | Quantitative and Qualitative Disclosures about Market Risk                                             | 31     |
|                                |                                                                                                   |   |
| Item 4T.                            | Controls and Procedures                                                                                | 31     |
|                                |                                                                                                   |   |
| PARTII — OTHER INFORMATION    | 34                                                                                                     |
|                                |                                                                                                   |   |
| Item 1.                             | Legal Proceedings                                                                                      | 34     |
|                                |                                                                                                   |   |
| Item 1A.                            | Risk Factors                                                                                           | 34     |
|                                |                                                                                                   |   |
| Item 2.                             | Unregistered Sales of Equity Securities and Use of Proceeds                                            | 34     |
|                                |                                                                                                   |   |
| Item 3.                             | Defaults Upon Senior Securities                                                                        | 34     |
|                                |                                                                                                   |   |
| Item 4.                             | <Removed and Reserved>                                                                           | 34     |
|                                |                                                                                                   |   |
| Item 5.                             | Other Information                                                                                      | 34     |
|                                |                                                                                                   |   |
| Item 6.                             | Exhibits                                                                                               | 35     |
|                                |                                                                                                   |   |
| SIGNATURES                          | 36                                                                                                     |
|   EX-31.1                      |                                                                                                   |   |
|   EX-31.2                      |                                                                                                   |   |
|   EX-32.1                      |                                                                                                   |   |
|   EX-32.2                      |                                                                                                   |   |

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|   | · | The Company’s adoption of accounting principles related to embedded conversion features included in certain convertible notes payable issued in May and October 2008 that became effective for the Company on October 1, 2009. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The effect of a change in a valuation allowance that resulted from a change in judgment about the realizability of the related deferred tax asset in future years. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In addition, certain reclassifications related to the accounting for deferred advertising costs and deferred income taxes have been made in order to maintain consistency and comparability with our subsequent presentations in fiscal year 2010 on Forms 10-Q and 10-K. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Part I – Item 1 – Condensed Consolidated Financial Statements |
|--------|--------|---------------------------------------------------------------------------|

|   | · | Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | Part I – Item 4T – Controls and Procedures |
|--------|--------|--------------------------------------------------------|

|   | · | Part II – Item 6 – Exhibits |
|--------|--------|-----------------------------------------|

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|                                                                                                                                                                                                           |   | As RestatedMarch 31, |    |   | September 30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|---------|--------|---------------|--------|
|                                                                                                                                                                                                           |   | 2010                 |    |   | 2009          |   |
|                                                                                                                                                                                                           |   | (unaudited)          |    |   |          |   |
| Assets                                                                                                                                                                                                         |   |                 |    |   |          |   |
| Current Assets                                                                                                                                                                                                 |   |                 |    |   |          |   |
| Cash                                                                                                                                                                                                           |   | $                    | 7,961   |   |          | $      | 3,798 |   |
| Restricted cash                                                                                                                                                                                                |   |                 | 1,056   |   |          |   | 500 |   |
| Accounts receivable, net of allowances of $3,232 and $2,327, respectively                                                                                                                                      |   |                 | 5,744   |   |          |   | 3,850 |   |
| Inventory, net of allowance for obsolete inventory of $110 and $110, respectively                                                                                                                              |   |                 | 1,552   |   |          |   | 902 |   |
| Deferred taxes, current portion                                                                                                                                                                                |   |                 | 1,206   |   |          |   | — |   |
| Other current assets                                                                                                                                                                                           |   |                 | 429     |   |          |   | 483 |   |
| Total Current Assets                                                                                                                                                                                           |   |                 | 17,948  |   |          |   | 9,533 |   |
| Property and Equipment, net of accumulated depreciation of $1,207 and $1,021, respectively                                                                                                                     |   |                 | 1,982   |   |          |   | 1,041 |   |
| Deferred advertising                                                                                                                                                                                           |   |                 | 6,499   |   |          |   | 3,755 |   |
| Deposits and other                                                                                                                                                                                             |   |                 | 201     |   |          |   | 130 |   |
| Total Assets                                                                                                                                                                                                   |   | $                    | 26,630  |   |          | $      | 14,459 |   |
|                                                                                                                                                                                                           |   |                 |    |   |          |   |   |   |
| Liabilities and Stockholders’ Equity                                                                                                                                                                     |   |                 |    |   |          |   |   |   |
| Current Liabilities                                                                                                                                                                                            |   |                 |    |   |          |   |   |   |
| Accounts payable                                                                                                                                                                                               |   | $                    | 3,569   |   |          | $      | 2,089 |   |
| Accrued liabilities                                                                                                                                                                                            |   |                 | 907     |   |          |   | 716 |   |
| Credit line facility                                                                                                                                                                                           |   |                 | 750     |   |          |   | — |   |
| Stockholder loans                                                                                                                                                                                              |   |                 | 1,315   |   |          |   | 1,515 |   |
| Convertible notes payable, net of unamortized discount of $361 and $292, respectively                                                                                                                          |   |                 | 5,787   |   |          |   | 3,893 |   |
| Derivative liabilities                                                                                                                                                                                         |   |                 | 10,977  |   |          |   | — |   |
| Capital lease obligations, current portion                                                                                                                                                                     |   |                 | 73      |   |          |   | 80 |   |
| Deferred rent liability, current portion                                                                                                                                                                       |   |                 | 46      |   |          |   | 60 |   |
| Total Current Liabilities                                                                                                                                                                                      |   |                 | 23,424  |   |          |   | 8,353 |   |
| Convertible notes payable, net of unamortized discount of $0 and $90, respectively                                                                                                                             |   |                 | — |   |          |   | 2,447 |   |
| Capital lease obligations, net of current portion                                                                                                                                                              |   |                 | 37      |   |          |   | 70 |   |
| Deferred rent liability, net of current portion                                                                                                                                                                |   |                 | 176     |   |          |   | 165 |   |
| Deferred tax liability                                                                                                                                                                                         |   |                 | 223     |   |          |   | — |   |
| Total Liabilities                                                                                                                                                                                              |   |                 | 23,860  |   |          |   | 11,035 |   |
|                                                                                                                                                                                                           |   |                 |    |   |          |   |   |   |
| Stockholders’ Equity                                                                                                                                                                                     |   |                 |    |   |          |   |   |   |
| Common stock, $.001 par value, 200,000 shares authorized; 39,118 and 32,462 shares issued, respectively; 39,029 and 32,377 shares outstanding at March 31, 2010 and September 30, 2009, respectively |   |                 | 39      |   |          |   | 32 |   |
| Additional paid-in capital                                                                                                                                                                                     |   |                 | 19,324  |   |          |   | 11,705 |   |
| Accumulated deficit                                                                                                                                                                                            |   |                 | (16,543 | )      |          |   | (8,272 | ) |
|                                                                                                                                                                                                           |   |                 | 2,820   |   |          |   | 3,465 |   |
| Less: Treasury stock, at cost; 89 and 85 shares at March 31, 2010 and September 30, 2009, respectively                                                                                               |   |                 | (50     | )      |          |   | (41 | ) |
| Total Stockholders’ Equity                                                                                                                                                                               |   |                 | 2,770   |   |          |   | 3,424 |   |
| Total Liabilities and Stockholders’ Equity                                                                                                                                                               |   | $                    | 26,630  |   |          | $      | 14,459 |   |

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|                                           |   | Three Months Ended March 31, |   |   | Six Months Ended March 31, |   |
|------------------------------------------------|--------|------------------------------|--------|--------|----------------------------|--------|
|                                           |   | As Restated2010              |   |   | 2009                       |   |   | As Restated2010 |   |   | 2009 |   |
| Sales                                          |   | $                            | 9,650  |   |                       | $      | 5,827 |   |   | $ | 18,808 |   |   | $ | 11,169 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Cost of Sales                                  |   |                         | 3,386  |   |                       |   | 2,078 |   |   |   | 6,633 |   |   |   | 3,919 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Gross Profit                                   |   |                         | 6,264  |   |                       |   | 3,749 |   |   |   | 12,175 |   |   |   | 7,250 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expenses                             |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Payroll, taxes and benefits                    |   |                         | 2,618  |   |                       |   | 1,274 |   |   |   | 4,787 |   |   |   | 2,339 |   |
| Advertising                                    |   |                         | 1,114  |   |                       |   | 459 |   |   |   | 1,920 |   |   |   | 757 |   |
| Bad debts                                      |   |                         | 928    |   |                       |   | 809 |   |   |   | 1,583 |   |   |   | 1,488 |   |
| Depreciation                                   |   |                         | 174    |   |                       |   | 67 |   |   |   | 270 |   |   |   | 134 |   |
| General and administrative                     |   |                         | 1,070  |   |                       |   | 778 |   |   |   | 2,094 |   |   |   | 1,660 |   |
| Total Operating Expenses                       |   |                         | 5,904  |   |                       |   | 3,387 |   |   |   | 10,654 |   |   |   | 6,378 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Income from Operations                         |   |                         | 360    |   |                       |   | 362 |   |   |   | 1,521 |   |   |   | 872 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense)                         |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                               |   |                         | (402   | )      |                       |   | (273 | ) |   |   | (819 | ) |   |   | (545 | ) |
| Change in fair value of derivative liabilities |   |                         | (59    | )      |                       |   | — |   |   |   | (5,157 | ) |   |   | — |   |
| Loss on disposal of assets                     |   |                         | (2     | )      |                       |   | — |   |   |   | (2 | ) |   |   | — |   |
| Interest Income                                |   |                         | 5      |   |                       |   | 6 |   |   |   | 8 |   |   |   | 14 |   |
| Total Other Income (Expense)                   |   |                         | (458   | )      |                       |   | (267 | ) |   |   | (5,970 | ) |   |   | (531 | ) |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) before Income Taxes              |   |                         | (98    | )      |                       |   | 95 |   |   |   | (4,449 | ) |   |   | 341 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Benefit from Income Taxes                      |   |                         | (6     | )      |                       |   | — |   |   |   | (1,012 | ) |   |   | — |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss)                              |   | $                            | (92    | )      |                       | $      | 95 |   |   | $ | (3,437 | ) |   | $ | 341 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share:               |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding            |   |                         | 34,921 |   |                       |   | 32,021 |   |   |   | 33,873 |   |   |   | 32,035 |   |
| Earnings (loss) per share                      |   | $                            | 0.00   |   |                       | $      | 0.00 |   |   | $ | (0.10 | ) |   | $ | 0.01 |   |
|                                           |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share:             |   |                         |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding            |   |                         | 34,921 |   |                       |   | 35,941 |   |   |   | 33,873 |   |   |   | 35,955 |   |
| Earnings (loss) per share                      |   | $                            | 0.00   |   |                       | $      | 0.00 |   |   | $ | (0.10 | ) |   | $ | 0.01 |   |

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|                                                 |   |   |   |   |   |   |    |    |   |   |        |   |   |     |    |   | Total               |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|---------|--------|--------|-------------|--------|--------|----------|---------|--------|---------------------|--------|
|                                                 |   | Common |   |   | Common |   |    | Paid in |   |   | Accumulated |   |   | Treasury |    |   | Stockholders’ |   |
|                                                 |   | Shares |   |   | Stock  |   |    | Capital |   |   | Deficit     |   |   | Stock    |    |   | Equity              |   |
| Balance at September 30, 2009                   |   |   | 32,377 |   |   | $      | 32      |    |   | $      | 11,705      |   |   | $        | (8,272  | )      |                | $      | (41 | ) |   | $ | 3,424 |   |
|                                                 |   |   |   |   |   |   |    |    |   |   |        |   |   |     |    |   |                |   |   |   |   |   |   |   |
| Cumulative effect of change in accounting principle  |   |   |   |   |   |   |    |    |   |   | (390        | )      |   |     | (4,834  | )      |                |   |   |   |   |   | (5,224 | ) |
| Options issued to employees                          |   |   |   |   |   |   |    |    |   |   | 208         |   |   |     |    |   |                |   |   |   |   |   | 208 |   |
| Common stock issued for interest on convertible debt |   |   | 19     |   |   |   | — |    |   |   | 45          |   |   |     |    |   |                |   |   |   |   |   | 45 |   |
| Common stock issued upon conversion of debt          |   |   | 1,086  |   |   |   | 1       |    |   |   | 542         |   |   |     |    |   |                |   |   |   |   |   | 543 |   |
| Common stock issued for exercise of warrants         |   |   | 723    |   |   |   | 1       |    |   |   | 529         |   |   |     |    |   |                |   |   |   |   |   | 530 |   |
| Common stock issued for employee stock purchase plan |   |   | 162    |   |   |   | — |    |   |   | 72          |   |   |     |    |   |                |   |   |   |   |   | 72 |   |
| Common stock issued for cash, net of issuance costs  |   |   | 4,666  |   |   |   | 5       |    |   |   | 6,613       |   |   |     |    |   |                |   |   |   |   |   | 6,618 |   |
| Purchase common treasury stock                       |   |   | (4     | )      |   |   |    |    |   |   |        |   |   |     |    |   |                |   | (9 | ) |   |   | (9 | ) |
| Net loss                                             |   |   |   |   |   |   |    |    |   |   |        |   |   |     | (3,437  | )      |                |   |   |   |   |   | (3,437 | ) |
|                                                 |   |   |   |   |   |   |    |    |   |   |        |   |   |     |    |   |                |   |   |   |   |   |   |   |
| Balance at March 31, 2010                       |   |   | 39,029 |   |   | $      | 39      |    |   | $      | 19,324      |   |   | $        | (16,543 | )      |                | $      | (50 | ) |   | $ | 2,770 |   |

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|                                                                                 |   | Restated2010 |    |   | 2009   |   |
|--------------------------------------------------------------------------------------|--------|--------------|---------|--------|--------|--------|
| Cash flow from operating activities:                                                 |   |         |    |   |   |   |
| Net Income (Loss)                                                                    |   | $            | (3,437  | )      |   | $      | 341 |   |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |   |         |    |   |   |   |   |   |
| Depreciation and amortization                                                        |   |         | 2,156   |   |   |   | 838 |   |
| Change in fair value of derivative liabilities                                       |   |         | 5,157   |   |   |   | — |   |
| Equity based compensation                                                            |   |         | 223     |   |   |   | 272 |   |
| Provision for doubtful accounts and sales returns and adjustments                    |   |         | 1,728   |   |   |   | 1,488 |   |
| Non-cash interest related to convertible notes payable                               |   |         | 662     |   |   |   | 322 |   |
| Deferred income taxes                                                                |   |         | (982    | )      |   |   | — |   |
| Amortization of non-cash debt issuance costs                                         |   |         | 17      |   |   |   | 20 |   |
| Loss on disposal of assets                                                           |   |         | 2       |   |   |   | — |   |
| Changes in operating assets and liabilities:                                         |   |         |    |   |   |   |   |   |
| Accounts receivable                                                                  |   |         | (3,621  | )      |   |   | (2,483 | ) |
| Deferred advertising                                                                 |   |         | (4,630  | )      |   |   | (1,918 | ) |
| Inventory                                                                            |   |         | (650    | )      |   |   | (181 | ) |
| Other assets                                                                         |   |         | (50     | )      |   |   | 174 |   |
| Accounts payable                                                                     |   |         | 1,479   |   |   |   | 929 |   |
| Accrued expenses                                                                     |   |         | 128     |   |   |   | 140 |   |
| Deferred rent                                                                        |   |         | (3      | )      |   |   | (24 | ) |
| Net Cash Flow Used in Operating Activities                                           |   |         | (1,821  | )      |   |   | (82 | ) |
|                                                                                 |   |         |    |   |   |   |   |   |
| Cash flow from investing activities:                                                 |   |         |    |   |   |   |   |   |
| Purchase of property and equipment                                                   |   |         | (1,217  | )      |   |   | (224 | ) |
| Proceeds from the sale of assets                                                     |   |         | 5       |   |   |   | — |   |
| Purchase of certificates of deposit                                                  |   |         | (556    | )      |   |   | — |   |
| Net Cash Flow Used in Investing Activities                                           |   |         | (1,768  | )      |   |   | (224 | ) |
|                                                                                 |   |         |    |   |   |   |   |   |
| Cash flow from financing activities:                                                 |   |         |    |   |   |   |   |   |
| Proceeds from the sale of common stock                                               |   |         | 7,000   |   |   |   | — |   |
| Costs associated with the sale of common stock                                       |   |         | (382    | )      |   |   | — |   |
| Proceeds from issuance of convertible notes                                          |   |         | — |   |   |   | 2,500 |   |
| Costs associated with issuance of convertible notes                                  |   |         | — |   |   |   | (326 | ) |
| Proceeds from the exercise of warrants                                               |   |         | 530     |   |   |   | — |   |
| Proceeds from employee stock purchase plan                                           |   |         | 104     |   |   |   | — |   |
| Proceeds from credit line facility                                                   |   |         | 750     |   |   |   | — |   |
| Purchase of treasury stock                                                           |   |         | (9      | )      |   |   | (29 | ) |
| Payments of debt and capital lease obligations                                       |   |         | (241    | )      |   |   | (67 | ) |
| Net Cash Flow Provided by Financing Activities                                       |   |         | 7,752   |   |   |   | 2,078 |   |
|                                                                                 |   |         |    |   |   |   |   |   |
| Net increase in cash                                                                 |   |         | 4,163   |   |   |   | 1,772 |   |
|                                                                                 |   |         |    |   |   |   |   |   |
| Cash at beginning of period                                                          |   |         | 3,798   |   |   |   | 1,173 |   |
| Cash at end of period                                                                |   | $            | 7,961   |   |   | $      | 2,945 |   |
|                                                                                 |   |         |    |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                    |   |         |    |   |   |   |   |   |
| Cash paid for interest                                                               |   | $            | 185     |   |   | $      | 179 |   |
| Cash paid for income taxes                                                           |   | $            | 20      |   |   | $      | — |   |
|                                                                                 |   |         |    |   |   |   |   |   |
| Supplemental schedule of non-cash investing and financing activities:                |   |         |    |   |   |   |   |   |
| Capital expenditures funded by capital lease borrowings                              |   | $            | — |   |   | $      | 48 |   |
| Common stock issued for interest expense                                             |   | $            | 45      |   |   | $      | — |   |
| Common stock issued for conversion of debt                                           |   | $            | 543     |   |   | $      | — |   |

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|   | · | On the Consolidated Balance Sheet as of September 30, 2009, $2,016,000 of Deferred Advertising was reclassified from Current Assets to Non-current Assets in order to be consistent with accounting guidance issued for deferred advertising costs. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----

----

| · | Previously, the Company had concluded that embedded anti-dilution provisions included in certain convertible notes payable issued in May and October 2008 were indexed to the Company’s own stock under accounting principles that became effective for the Company on October 1, 2009, and did not change the accounting treatment for the embedded conversion features when the guidance became effective for the Company on October 1, 2009. However, after re-evaluating the accounting principles issued and our accounting treatment for the embedded conversion features, the Company concluded that an error was made in the application of the accounting principles, that the embedded anti-dilution provisions are not indexed to the Company’s own stock, and, therefore, they are embedded derivative financial liabilities (the “Embedded Derivatives”) that require bifurcation and separate accounting. Accordingly, the Company should have recorded a cumulative effect adjustment to the opening balance of paid in capital and accumulated deficit on October 1, 2009. In addition, the Company is required to adjust the Embedded Derivatives to fair value at each balance sheet date, or interim period, and recognize the changes in fair value as a non-cash charge or benefit to earnings, recorded as a component of other income (expense) in the Company’s condensed consolidated statement of operations. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Previously, the Company included a change in the valuation allowance as an adjustment to the estimated annual tax rate used in the calculation of interim period deferred taxes, which allocated the tax benefits proportionately throughout the four quarters of fiscal year 2010. Based on a re-evaluation of generally accepted accounting principles, the Company recorded the effect of the change in the valuation allowance as a discrete event, which resulted in an additional $956,000 in tax benefits during the six months ended March 31, 2010. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In addition, certain reclassifications related to the accounting for deferred advertising costs and deferred income taxes have been made in order to maintain consistency and comparability with our subsequent presentations in fiscal year 2010 on Forms 10-Q and 10-K. The Company had reflected both a current and long term portion of the deferred advertising assets on the condensed consolidated balance sheet as of March 31, 2010. In accordance with an SEC interpretation (SPCH.T.1995.22.Glynn), the SEC would object to the classification of any unamortized cost of advertising as a current asset. As a result, the Company reclassified the amount previously recorded as current assets to non-current assets. Also, the Company had reported its non-current deferred tax assets and deferred tax liabilities separately on the condensed consolidated balance sheet as of March 31, 2010. The Company has consolidated the non-current portion of the deferred tax assets and the deferred tax liabilities and reported the non-current portion of the deferred taxes as a consolidated deferred tax liability in accordance with generally accepted accounting principles. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Balance Sheet Data:                   |   | AsPreviouslyReported |    |   | Reclassifications |   |    | CumulativeEffectAdjustmentas of10/1/2009 |   |   | CurrentPeriodEffect |   |   | AsRestated |    |
|---------------------------------------|--------|----------------------|---------|--------|-------------------|--------|---------|------------------------------------------|--------|--------|---------------------|--------|--------|------------|---------|
|                                  |   |                 |    |   |              |   |    |                                     |   |   |                |   |   |       |    |
| Deferred advertising, current portion |   |                 | 3,499   |   |              |   | (3,499  | )                                        |   |   | —             |   |   |       | — |   |   |   | — |   |
| Deferred taxes, current portion       |   |                 | 555     |   |              |   | — |                                     |   |   | —             |   |   |       | 651     |   |   |   | 1,206 |   |
| Total Current Assets                  |   |                 | 20,796  |   |              |   | (3,499  | )                                        |   |   | —             |   |   |       | 651     |   |   |   | 17,948 |   |
| Deferred advertising                  |   |                 | 3,000   |   |              |   | 3,499   |                                     |   |   | —             |   |   |       | — |   |   |   | 6,499 |   |
| Deferred taxes, net of current        |   |                 | 545     |   |              |   | (545    | )                                        |   |   | —             |   |   |       | — |   |   |   | — |   |
| Total Assets                          |   |                 | 26,524  |   |              |   | (545    | )                                        |   |   | —             |   |   |       | 651     |   |   |   | 26,630 |   |
|                                  |   |                 |    |   |              |   |    |                                     |   |   |                |   |   |       |    |   |   |   |   |   |
| Notes Payable, net                    |   | $                    | 6,037   |   |              |   | — |                                     |   | $      | (596                | )      |   | $          | 346     |   |   | $ | 5,787 |   |
| Derivative liabilities                |   |                 | — |   |              |   | — |                                     |   |   | 5,820               |   |   |       | 5,157   |   |   |   | 10,977 |   |
| Total Current Liabilities             |   |                 | 12,697  |   |              |   | — |                                     |   |   | 5,224               |   |   |       | 5,503   |   |   |   | 23,424 |   |
| Deferred tax liability                |   |                 | 1,495   |   |              |   | 545     |                                     |   |   | —             |   |   |       | (1,817  | ) |   |   | 223 |   |
| Total Liabilities                     |   |                 | 14,405  |   |              |   | 545     |                                     |   |   | 5,224               |   |   |       | 3,686   |   |   |   | 23,860 |   |
|                                  |   |                 |    |   |              |   |    |                                     |   |   |                |   |   |       |    |   |   |   |   |   |
| Additional Paid in Capital            |   |                 | 19,291  |   |              |   | — |                                     |   |   | (390                | )      |   |       | 423     |   |   |   | 19,324 |   |
| Accumulated Deficit                   |   |                 | (7,161  | )      |              |   | — |                                     |   |   | (4,834              | )      |   |       | (4,548  | ) |   |   | (16,543 | ) |
| Total Equity (Deficit)                |   | $                    | 12,119  |   |              |   | — |                                     |   | $      | (5,224              | )      |   | $          | (4,125  | ) |   | $ | 2,770 |   |

|                                           |   | For the three months ended March 31, 2010 |    |   | For the six months endedMarch 31, 2010 |   |
|------------------------------------------------|--------|------------------------------------------------|---------|--------|----------------------------------------|--------|
| Statement of Operations Data:                  |   | AsPreviouslyReported                           |    |   | CurrentPeriodEffect                    |   |   | AsRestated |   |   | AsPreviouslyReported |   |   | CurrentPeriodEffect |   |   | AsRestated |   |
|                                           |   |                                           |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                        |   |                                           |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                               |   |                                           | (229    | )      |                                   |   | (173 | ) |   |   | (402 | ) |   |   | (472 | ) |   |   | (347 | ) |   |   | (819 | ) |
| Change in fair value of derivative liabilities |   |                                           | — |   |                                   |   | (59 | ) |   |   | (59 | ) |   |   | — |   |   |   | (5,157 | ) |   |   | (5,157 | ) |
| Total Other Income (Expense)                   |   |                                           | (226    | )      |                                   |   | (232 | ) |   |   | (458 | ) |   |   | (466 | ) |   |   | (5,504 | ) |   |   | (5,970 | ) |
|                                           |   |                                           |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for (Benefit from) Income Taxes      |   |                                           | (122    | )      |                                   |   | 116 |   |   |   | (6 | ) |   |   | (56 | ) |   |   | (956 | ) |   |   | (1,012 | ) |
| Net Income (Loss)                              |   | $                                              | 256     |   |                                   | $      | (348 | ) |   | $ | (92 | ) |   | $ | 1,111 |   |   | $ | (4,548 | ) |   | $ | (3,437 | ) |
|                                           |   |                                           |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic Earnings (Loss) per Share                |   | $                                              | 0.01    |   |                                   | $      | (0.01 | ) |   | $ | (0.00 | ) |   | $ | 0.03 |   |   | $ | (0.13 | ) |   | $ | (0.10 | ) |
| Diluted Earnings (Loss) per Share              |   | $                                              | 0.01    |   |                                   | $      | (0.01 | ) |   | $ | (0.00 | ) |   | $ | 0.02 |   |   | $ | (0.12 | ) |   | $ | (0.10 | ) |

| Level 1 | – | Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.                                                                                                            |
|---------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |    |                                                                                                                                                                                                                |
| Level 2 | – | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.                                                    |
|    |    |                                                                                                                                                                                                                |
| Level 3 | – | Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date. |

----

| March 31, 2010                            |
|-------------------------------------------|
| Instrument                                |   | Fair Value |   |   | Carrying Value |   |   | Level |   | Valuation Methodology |
| Derivative liabilities (See Note 9 below) |   | $ | 10,977 |   |   | $ | 10,977 |   |   |   | 3 |   | Monte CarloSimulation model |

|                                             |   | 2010   |    |
|--------------------------------------------------|--------|--------|---------|
| Beginning balance: Derivative liabilities        |   | $      | — |   |
| Adoption of change in accounting principle       |   |   | 5,820   |   |
| Total loss on change in derivative liabilities   |   |   | 5,157   |   |
| Purchases, sales, issuances and settlements, net |   |   | — |   |
| Ending balance: Derivative liabilities           |   | $      | 10,977  |   |

|                           | Estimated |   | March 31, |   |   | September 30, |   |
|--------------------------------|-----------|--------|-----------|--------|--------|---------------|--------|
|                           | Life      |   | 2010      |   |   | 2009          |   |
| Leased equipment               | 5 years   |   | $         | 582    |   |          | $      | 582 |   |
| Transportation equipment       | 3 years   |   |      | 72     |   |          |   | 95 |   |
| Warehouse equipment            | 5 years   |   |      | 64     |   |          |   | 56 |   |
| Office furniture               | 5 years   |   |      | 450    |   |          |   | 150 |   |
| Computer equipment             | 3 years   |   |      | 204    |   |          |   | 87 |   |
| Telephone equipment            | 5 years   |   |      | 77     |   |          |   | 33 |   |
| Rental equipment               | 7 years   |   |      | 18     |   |          |   | 18 |   |
| Web Site                       | 3 years   |   |      | 6      |   |          |   | 6 |   |
| Software                       | 3 years   |   |      | 222    |   |          |   | 130 |   |
| Training guides                | 3 years   |   |      | 3      |   |          |   | 3 |   |
| Leasehold improvements         | 5 years   |   |      | 1,470  |   |          |   | 889 |   |
| Signage                        | 3 years   |   |      | 21     |   |          |   | 13 |   |
| Total property and equipment   |      |   |      | 3,189  |   |          |   | 2,062 |   |
| Less: accumulated depreciation |      |   |      | (1,207 | )      |          |   | (1,021 | ) |
| Property and equipment, net    |      |   | $         | 1,982  |   |          | $      | 1,041 |   |

----

|                                        |   | Amount Due |   |
|---------------------------------------------|--------|------------|--------|
| April 2010                             |   |       | 58     |   |
| Total April 2008 Convertible Notes Due |   | $          | 58     |   |

----

----

|                                     |   | April’08 Notes |    |   | May’08 Note |   |   | Oct’08 Note |   |   | Totals |   |
|------------------------------------------|--------|----------------------|---------|--------|-------------------|--------|--------|-------------------|--------|--------|--------|--------|
| Notes Payable, face amount               |   | $                    | 58      |   |              | $      | 3,500  |              |   | $      | 2,500  |   |   | $ | 6,058 |   |
| Discounts on Notes:                      |   |                 |    |   |              |   |   |              |   |   |   |   |   |   |   |   |
| Initial valuation of Warrants            |   |                 | (126    | )      |              |   | (610   | )                 |   |   | (86    | )      |   |   | (822 | ) |
| Initial valuation of Embedded Derivative |   |                 | — |   |              |   | (930   | )                 |   |   | (841   | )      |   |   | (1,771 | ) |
| Accumulated Amortization                 |   |                 | 126     |   |              |   | 1,432  |              |   |   | 674    |   |   |   | 2,232 |   |
| Total Discounts                          |   |                 | — |   |              |   | (108   | )                 |   |   | (253   | )      |   |   | (361 | ) |
| Accrued Interest                         |   |                 | 10      |   |              |   | 43     |              |   |   | 37     |   |   |   | 90 |   |
| Convertible Notes Payable, net           |   | $                    | 68      |   |              | $      | 3,435  |              |   | $      | 2,284  |   |   | $ | 5,787 |   |

|                                              |   | April’08 Notes |    |   | May’08 Note |   |   | Totals |   |
|---------------------------------------------------|--------|----------------------|---------|--------|-------------------|--------|--------|--------|--------|
| Notes Payable, face amount                        |   | $                    | 601     |   |              | $      | 3,500  |   |   | $ | 4,101 |   |
| Discounts on Notes:                               |   |                 |    |   |              |   |   |   |   |   |   |   |
| Initial valuation of Warrants                     |   |                 | (126    | )      |              |   | (610   | )      |   |   | (736 | ) |
| Initial valuation of Beneficial Conversion Option |   |                 | — |   |              |   | (303   | )      |   |   | (303 | ) |
| Accumulated Amortization                          |   |                 | 126     |   |              |   | 621    |   |   |   | 747 |   |
| Total Discounts                                   |   |                 | — |   |              |   | (292   | )      |   |   | (292 | ) |
| Accrued Interest                                  |   |                 | 40      |   |              |   | 44     |   |   |   | 84 |   |
| Convertible Notes Payable, net                    |   | $                    | 641     |   |              | $      | 3,252  |   |   | $ | 3,893 |   |

|                                              |   | Oct’08 Note |   |
|---------------------------------------------------|--------|-------------------|--------|
| Notes Payable, face amount                        |   | $                 | 2,500  |   |
| Discounts on Notes:                               |   |              |   |   |
| Initial valuation of Warrants                     |   |              | (86    | ) |
| Initial valuation of Beneficial Conversion Option |   |              | (86    | ) |
| Accumulated Amortization                          |   |              | 82     |   |
| Total Discounts                                   |   |              | (90    | ) |
| Accrued Interest                                  |   |              | 37     |   |
| Convertible Notes Payable, net                    |   | $                 | 2,447  |   |

----

|                           |   | BalanceSeptember 30, 2009 |    |   | CumulativeEffect ofAdjustment |   |   | BalanceOctober 1, 2009 |   |
|--------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|--------|-----------------------------|--------|
| Derivative liabilities         |   | $                              | — |   |                          | $      | 5,820  |                        |   | $ | 5,820 |   |
| Convertible Notes Payable, net |   |                           | 6,340   |   |                          |   | (596   | )                           |   |   | 5,744 |   |
| Additional paid-in capital     |   |                           | 11,705  |   |                          |   | (390   | )                           |   |   | 11,315 |   |
| Accumulated deficit            |   |                           | (8,272  | )      |                          |   | (4,834 | )                           |   |   | (13,106 | ) |

|                                       |   | May 2008 Note |   |   | October 2008 Note |   |
|--------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Risk-free interest rate:                   |   |          | 2.56   | %      |              |   | 1.64 | % |
| Expected term:                             |   | 2 years       |   |   | 2 years           |   |
| Expected dividend yield:                   |   |          | 0.00   | %      |              |   | 0.00 | % |
| Expected volatility:                       |   |          | 45.29  | %      |              |   | 50.87 | % |
| Probability of triggering reset provision: |   |          | 64.17  | %      |              |   | 61.62 | % |
| Existing conversion price per share        |   | $             | 0.80   |   |              | $      | 0.75 |   |
| Company’s stock price per share      |   | $             | 0.73   |   |              | $      | 0.75 |   |

|                                       |   | May 2008 Note |   |   | October 2008 Note |   |
|--------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Risk-free interest rate:                   |   |          | 0.40   | %      |              |   | 0.40 | % |
| Expected term:                             |   | 0.64 years    |   |   | 1.05 years        |   |
| Expected dividend yield:                   |   |          | 0.00   | %      |              |   | 0.00 | % |
| Expected volatility:                       |   |          | 56.03  | %      |              |   | 56.03 | % |
| Probability of triggering reset provision: |   |          | 22.42  | %      |              |   | 19.18 | % |
| Existing conversion price per share        |   | $             | 0.80   |   |              | $      | 0.75 |   |
| Company’s stock price per share      |   | $             | 1.45   |   |              | $      | 1.45 |   |

|                                       |   | May 2008 Note |   |   | October 2008 Note |   |
|--------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Risk-free interest rate:                   |   |          | 0.24   | %      |              |   | 0.24 | % |
| Expected term:                             |   | 0.14 years    |   |   | 0.55 years        |   |
| Expected dividend yield:                   |   |          | 0.00   | %      |              |   | 0.00 | % |
| Expected volatility:                       |   |          | 48.58  | %      |              |   | 48.58 | % |
| Probability of triggering reset provision: |   |          | 0.01   | %      |              |   | 0.03 | % |
| Existing conversion price per share        |   | $             | 0.80   |   |              | $      | 0.75 |   |
| Company’s stock price per share      |   | $             | 2.20   |   |              | $      | 2.20 |   |

----

|                                                  |   | Amount |   |
|-------------------------------------------------------|--------|--------|--------|
| Year ending September 30:                        |   |   |   |
| 2010                                                  |   | $      | 50     |   |
| 2011                                                  |   |   | 62     |   |
| 2012                                                  |   |   | 13     |   |
| Total minimum lease payments                          |   |   | 125    |   |
| Less: Interest on capitalized lease obligations       |   |   | (15    | ) |
| Present value of capitalized lease obligations        |   |   | 110    |   |
| Less: Current portion                                 |   |   | (73    | ) |
| Capitalized lease obligations, net of current portion |   | $      | 37     |   |

----

| Shares    |   | Expiration Date    |
|-----------|--------|--------------------|
| 7,188     |   | April 2010         |
| 31,250    |   | May 2010           |
| 1,778,404 |   | June 2010          |
| 337,500   |   | July 2010          |
| 12,500    |   | August 2010        |
| 25,000    |   | November 2010 |

| Shares  |   | Expiration Date     |
|---------|--------|---------------------|
| 6,250   |   | July 2010           |
| 159,375 |   | August 2010         |
| 75,625  |   | September 2010 |
| 169,167 |   | October 2010        |
| 145,000 |   | November 2010  |
| 31,250  |   | December 2010       |
| 6,250   |   | January 2011        |

| Risk-free interest rate: |   |         | 4.11   | % |
|--------------------------|--------|--------------|--------|---|
| Expected term:           |   | 5 years |   |
| Expected dividend yield: |   |         | 0.00   | % |
| Expected volatility:     |   |         | 27.97  | % |

| Shares  |   | Expiration Date    |
|---------|--------|--------------------|
| 263,000 |   | February 2013 |
| 100,000 |   | March 2013         |
| 497,000 |   | April 2013         |

| Risk-free interest rate: |   | Range of 2.39% to 2.93 | %      |
|--------------------------|--------|--------------------------------------------|--------|
| Expected term:           |   | 5 years                               |   |
| Expected dividend yield: |   |                                       | 0.00   | % |
| Expected volatility:     |   |                                       | 27.97  | % |

----

| Risk-free interest rate: |         |   | 3.24  | % |
|--------------------------|--------------|--------|-------|---|
| Expected term:           | 5 years |   |
| Expected dividend yield: |         |   | 0.00  | % |
| Expected volatility:     |         |   | 27.97 | % |

| Risk-free interest rate: |   |   | 1.90         | %      |
|--------------------------|--------|--------|--------------|--------|
| Expected term:           |   |   | 3 years |   |
| Expected dividend yield: |   |   | 0.00         | %      |
| Expected volatility:     |   |   | 35.19        | %      |

| Risk-free interest rate: |   |         | 2.34   | % |
|--------------------------|--------|--------------|--------|---|
| Expected term:           |   | 5 years |   |
| Expected dividend yield: |   |         | 0.00   | % |
| Expected volatility:     |   |         | 63.66  | % |

|                               |   |   |       | Weighted |   |
|------------------------------------|--------|--------|------------|----------|--------|
|                               |   |   |       | Avg.     |   |
|                               |   |   |       | Exercise |   |
| Warrants:                          |   | Shares |       | Price    |   |
| Balance at September 30, 2009 |   |   | 10,458,093 |     |   | $ | 1.07 |   |
| Issued                             |   |   | 233,333    |     |   |   | 2.50 |   |
| Exercised                          |   |   | (880,000   | )        |   |   | 1.00 |   |
| Expired                            |   |   | —    |     |   |   | — |   |
| Balance at March 31, 2010     |   |   | 9,811,426  |     |   | $ | 1.11 |   |

----

|                     |   | 2010    |   |    | 2009   |   |
|--------------------------|--------|---------|--------|---------|--------|--------|
| Risk-free interest rate: |   |    | 1.37   | %       |   |   | 1.82 | % |
| Expected term:           |   | 3 years |   | 3 years |
| Expected dividend yield: |   |    | 0.00   | %       |   |   | 0.00 | % |
| Expected volatility:     |   |    | 67.67  | %       |   |   | 36.05 | % |

----

|                                           |   |   |      |   |   | Weighted |    |   |      |   |
|------------------------------------------------|--------|--------|-----------|--------|--------|----------|---------|--------|-----------|--------|
|                                           |   |   |      |   |   | Avg.     |    |   | Aggregate |   |
|                                           |   |   |      |   |   | Exercise |    |   | Intrinsic |   |
| 2007 Stock Plan:                     |   | Shares |      |   | Price  |     |    | Value  |      |
| Options outstanding at September 30, 2009 |   |   | 1,580,000 |   |   | $        | 0.81    |   |      |   |   |   |
| Granted                                        |   |   | 150,000   |   |   |     | 2.14    |   |      |   |   |   |
| Exercised                                      |   |   | —   |   |   |     | — |   |      |   |   |   |
| Expired or forfeited                           |   |   | —   |   |   |     | — |   |      |   |   |   |
| Options outstanding at March 31, 2010     |   |   | 1,730,000 |   |   | $        | 0.93    |   |      | $      | 2,144,100 |   |
| Options exercisable at March 31, 2010     |   |   | 755,000   |   |   | $        | 0.79    |   |      | $      | 1,064,250 |   |

----

|                                                |   | For the three months ended |    |   | For the six months ended |   |
|-----------------------------------------------------|--------|------------------------------------------------|---------|--------|----------------------------------------------|--------|
|                                                |   | March 31,                                 |    |   | March 31,                               |   |
|                                                |   | 2010                                           |    |   | 2009                                         |   |   | 2010 |   |   | 2009 |   |
| Numerator:                                          |   |                                           |    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) — basic                     |   | $                                              | (92     | )      |                                         | $      | 95 |   |   | $ | (3,437 | ) |   | $ | 341 |   |
|                                                |   |                                           |    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                        |   |                                           |    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding — basic   |   |                                           | 34,921  |   |                                         |   | 32,021 |   |   |   | 33,873 |   |   |   | 32,035 |   |
| Effect of dilutive securities:                      |   |                                           |    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Stock options and warrants                          |   |                                           | — |   |                                         |   | 3,920 |   |   |   | — |   |   |   | 3,920 |   |
| Weighted average shares outstanding — diluted |   |                                           | 34,921  |   |                                         |   | 35,941 |   |   |   | 33,873 |   |   |   | 35,955 |   |
|                                                |   |                                           |    |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share — basic             |   | $                                              | (0.00   | )      |                                         | $      | 0.00 |   |   | $ | (0.10 | ) |   | $ | 0.01 |   |
| Earnings (loss) per share — diluted           |   | $                                              | (0.00   | )      |                                         | $      | 0.00 |   |   | $ | (0.10 | ) |   | $ | 0.01 |   |

|                       |   | For the three and/or six months |        |
|----------------------------|--------|----------------------------------------------------------|-------------|
|                       |   | ended March 31,                                |        |
|                       |   | 2010                                                     |        |   | 2009 |   |
| Stock options              |   |                                                     | 5,651       |   |   |   | 975 |   |
| Warrants                   |   |                                                     | 9,811       |   |   |   | 10,468 |   |
| Convertible debt           |   |                                                     |  7,825 |   |   |   | 9,193 |   |
| Net income — diluted |   |                                                     | 23,287      |   |   |   | 20,636 |   |

----

|                           |   | Amount |   |
|--------------------------------|--------|--------|--------|
| Year ending September 30: |   |   |   |   |
| 2010                           |   | $      | 289    |   |
| 2011                           |   |   | 661    |   |
| 2012                           |   |   | 608    |   |
| 2013                           |   |   | 271    |   |
| 2014                           |   |   | 204    |   |
|                           |   | $      | 2,033  |   |

----

----

|                              |   | For the three months ended March 31, |   |    | For the six months ended March 31, |   |
|-----------------------------------|--------|--------------------------------------------------------------------|--------|---------|------------------------------------------------------------------|--------|
|                              |   | 2010                                                               |   |    | 2009                                                             |   |   | 2010 |   |   | 2009 |   |
|                              |   | As RestatedAmount                                             |   |    | %                                                                |   |   | Amount |   |   | % |   |   | As RestatedAmount |   |   | % |   |   | Amount |   |   | % |   |
| Sales                             |   | $                                                                  | 9,650  |    |                                                             |   | 100.0 |   |   | $ | 5,827 |   |   |   | 100.0 |   |   | $ | 18,808 |   |   |   | 100.0 |   |   | $ | 11,169 |   |   |   | 100.0 |   |
| Cost of Sales                     |   |                                                               | 3,386  |    |                                                             |   | 35.1 |   |   |   | 2,078 |   |   |   | 35.7 |   |   |   | 6,633 |   |   |   | 35.3 |   |   |   | 3,919 |   |   |   | 35.1 |   |
| Gross Profit                      |   |                                                               | 6,264  |    |                                                             |   | 64.9 |   |   |   | 3,749 |   |   |   | 64.3 |   |   |   | 12,175 |   |   |   | 64.7 |   |   |   | 7,250 |   |   |   | 64.9 |   |
| Operating Expenses                |   |                                                               | 5,904  |    |                                                             |   | 61.2 |   |   |   | 3,387 |   |   |   | 58.1 |   |   |   | 10,654 |   |   |   | 56.6 |   |   |   | 6,378 |   |   |   | 57.1 |   |
| Income from Operations            |   |                                                               | 360    |    |                                                             |   | 3.7 |   |   |   | 362 |   |   |   | 6.2 |   |   |   | 1,521 |   |   |   | 8.1 |   |   |   | 872 |   |   |   | 7.8 |   |
| Other Income (Expense)            |   |                                                               | (458   | )       |                                                             |   | (4.7 | ) |   |   | (267 | ) |   |   | (4.6 | ) |   |   | (5,970 | ) |   |   | (31.7 | ) |   |   | (531 | ) |   |   | (4.8 | ) |
| Income (loss) before Income Taxes |   |                                                               | (98    | )       |                                                             |   | (1.0 | ) |   |   | 95 |   |   |   | 1.6 |   |   |   | (4,449 | ) |   |   | (23.7 | ) |   |   | 341 |   |   |   | 3.1 |   |
| Benefits from Income Taxes        |   |                                                               | (6     | )       |                                                             |   | (0.0 | ) |   |   | — |   |   |   | 0.0 |   |   |   | (1,012 | ) |   |   | (5.4 | ) |   |   | — |   |   |   | 0.0 |   |
| Net Income (Loss)                 |   | $                                                                  | (92    | )  |                                                             |   | (1.0 | ) |   | $ | 95 |   |   |   | 1.6 |   |   | $ | (3,437 | ) |   |   | (18.3 | ) |   | $ | 341 |   |   |   | 3.1 |   |

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|                           |   | For the three months ended March 31, |   |   | For the six months ended March 31, |   |
|--------------------------------|--------|--------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|                           |   | 2010                                                               |   |   | 2009                                                             |   |   | 2010 |   |   | 2009 |   |
|                           |   | As RestatedAmount                                             |   |   | %                                                                |   |   | Amount |   |   | % |   |   | As RestatedAmount |   |   | % |   |   | Amount |   |   | % |   |
| Operating Expenses:            |   |                                                               |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payroll, taxes, & benefits |   | $                                                                  | 2,618  |   |                                                             |   | 27.1 |   |   | $ | 1,274 |   |   |   | 21.9 |   |   | $ | 4,787 |   |   |   | 25.5 |   |   | $ | 2,339 |   |   |   | 20.9 |   |
| Advertising                    |   |                                                               | 1,114  |   |                                                             |   | 11.6 |   |   |   | 459 |   |   |   | 7.9 |   |   |   | 1,920 |   |   |   | 10.2 |   |   |   | 757 |   |   |   | 6.8 |   |
| Bad debts                      |   |                                                               | 928    |   |                                                             |   | 9.6 |   |   |   | 809 |   |   |   | 13.9 |   |   |   | 1,583 |   |   |   | 8.4 |   |   |   | 1,488 |   |   |   | 13.3 |   |
| Depreciation                   |   |                                                               | 174    |   |                                                             |   | 1.8 |   |   |   | 67 |   |   |   | 1.1 |   |   |   | 270 |   |   |   | 1.4 |   |   |   | 134 |   |   |   | 1.2 |   |
| General and administration     |   |                                                               | 1,070  |   |                                                             |   | 11.1 |   |   |   | 778 |   |   |   | 13.3 |   |   |   | 2,094 |   |   |   | 11.1 |   |   |   | 1,660 |   |   |   | 14.9 |   |
| Total Operating Expenses       |   | $                                                                  | 5,904  |   |                                                             |   | 61.2 |   |   | $ | 3,387 |   |   |   | 58.1 |   |   | $ | 10,654 |   |   |   | 56.6 |   |   | $ | 6,378 |   |   |   | 57.1 |   |

|                                           |   | For the three monthsended March 31, 2010 |   | For the six monthsended March 31, 2010 |
|------------------------------------------------|--------|------------------------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                           |   | As Restated2010                                                   |   |                                                                 | 2009 |   |   | As Restated2010 |   |   | 2009 |   |
| Other Income (Expense):                        |   |                                                                   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                               |   | $                                                                      | (402   | )                                                                    |   | $ | (273 | ) |   | $ | (818 | ) |   | $ | (545 | ) |
| Change in fair value of derivative liabilities |   |                                                                   | (59    | )                                                                    |   |   | — |   |   |   | (5,157 | ) |   |   | — |   |
| Loss on disposal of assets                     |   |                                                                   | (2     | )                                                                    |   |   | — |   |   |   | (2 | ) |   |   | — |   |
| Interest income                                |   |                                                                   | 5      |                                                                 |   |   | 6 |   |   |   | 8 |   |   |   | 14 |   |
| Total Other Income (Expense)                   |   | $                                                                      | (458   | )                                                                    |   | $ | (267 | ) |   | $ | (5,969 | ) |   | $ | (531 | ) |

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|                                         |   | ClosingMarketPrice ofCommonStock |   |   | Change in Fair Value ofDerivativeLiabilitiesIncome / (Expense) |   |
|----------------------------------------------|--------|---------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|
| Interim period ending:                       |   |                                  |   |   |                                                                                         |   |   |   |
| September 30, 2009, Q4 2009                  |   | $                                     | 1.45   |   |                                                                                         | $      | n/a |   |
| December 31, 2009, Q1 2010                   |   |                                  | 2.18   |   |                                                                                         |   | (5,098 | ) |
| March 31, 2010, Q2 2010                      |   |                                  | 2.20   |   |                                                                                         |   | (59 | )  |
| Total Change in FV of Derivative Liabilities |   |                                  |   |   |                                                                                         | $      | (5,157 | ) |

|                                      |   | For the six months ended |   |
|-------------------------------------------|--------|----------------------------------------------|--------|
|                                      |   | March 31,                               |   |
|                                      |   | As Restated2010                         |   |   | 2009 |   |
| Cash Flows:                               |   |                                         |   |   |   |   |   |   |
| Net cash used in operating activities     |   | $                                            | (1,821 | ) |   | $ | (82 | ) |
| Net cash used in investing activities     |   |                                         | (1,768 | ) |   |   | (224 | ) |
| Net cash provided by financing activities |   |                                         | 7,752  |   |   |   | 2,078 |   |
| Net increase in cash                      |   |                                         | 4,163  |   |   |   | 1,772 |   |
| Cash at beginning of period               |   |                                         | 3,798  |   |   |   | 1,173 |   |
| Cash at end of period                     |   | $                                            | 7,961  |   |   | $ | 2,945 |   |

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|   | • | Continue our advertising and marketing efforts; |
|--------|---------|-------------------------------------------------|

|   | • | Increase our customer base; |
|--------|---------|-----------------------------|

|   | • | Continue to service our current customer base and increase the retention rate; |
|--------|---------|--------------------------------------------------------------------------------|

|   | • | Continue to invest in the expansion of our infrastructure and workforce; and |
|--------|---------|------------------------------------------------------------------------------|

|   | • | Increase our accounts receivable collection efforts. |
|--------|---------|------------------------------------------------------|

|   | • | Completed the private placement of shares of our common stock to a single institutional investor for gross proceeds of $7.0 million; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Identified products and related target customers through extensive market research; |
|--------|---------|-------------------------------------------------------------------------------------|

|   | • | Expanded our advertising and marketing efforts on the Internet to reach qualified customers in an efficient and cost-effective manner; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Established an infrastructure of management and knowledgeable staff to support substantial growth in sales with a minimal amount of additional staff members, maximizing our revenue per employee; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Completed the build out of an additional 24,000 square foot facility to house our expanding workforce and support our continued growth; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Appointed three independent members to our Board of Directors; |
|--------|---------|----------------------------------------------------------------|

|   | • | Created a HIPPA compliant IT infrastructure and staff to accommodate additional growth in sales; |
|--------|---------|--------------------------------------------------------------------------------------------------|

|   | • | Established a marketing plan that can be monitored for effectiveness and is flexible enough to adjust to changing market conditions; and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Tested our advertising methods and established methods of testing additional advertising methods to meet changing market conditions. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Payments due by period |   |
|----------------------------------|--------|---------------------------------------|--------|
|                             |   | Totals                                |   |   | FY 2010 |   |   | FY 2011 |   |   | FY 2012 |   |   | FY 2013 |   |   | FY 2014 |   |
| Convertible debt obligations (1) |   | $                                     | 6,204  |   |   | $ | 3,663 |   |   | $ | 2,541 |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Operating leases                 |   |                                  | 2,033  |   |   |   | 289 |   |   |   | 661 |   |   |   | 608 |   |   |   | 271 |   |   |   | 204 |   |
| Capital lease obligations        |   |                                  | 125    |   |   |   | 50 |   |   |   | 62 |   |   |   | 13 |   |   |   | — |   |   |   | — |   |
| Purchase commitment (2)          |   |                                  | 488    |   |   |   | 58 |   |   |   | 120 |   |   |   | 120 |   |   |   | 120 |   |   |   | 70 |   |
| Total contractual obligations    |   | $                                     | 8,850  |   |   | $ | 4,060 |   |   | $ | 3,384 |   |   | $ | 741 |   |   | $ | 391 |   |   |   | 274 |   |

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| (1) | The convertible debt obligations that are due in fiscal year 2010 include $58,000 of convertible notes that are convertible into shares of our common stock at a conversion price of $0.50 per share and $3,500,000 of convertible notes that are convertible into shares of our common stock at a conversion price of $0.80 per share. These convertible notes were converted into shares of our common stock during April and May 2010. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The purchase commitment consists of a long distance service agreement that requires us to purchase a minimum of $10,000 per month, partially offset by rebates for the first five months of calendar year 2010, of long distance service through April 2014. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Assess and Identify the Impact of Recently Issued Accounting Pronouncements: The Company’s procedures to assess and identify the impact of Recently Issued Accounting Pronouncements were not sufficient, as evidenced by the Company’s failure to timely identify the impact of ASC 815-40-15, “Derivatives and Hedging — Contracts in Entity’s Own Equity (Scope and Scope Exceptions),“which became effective for the Company on October 1, 2009. The Company did not become aware of the new guidance until June 2010, and the impacts of the accounting guidance were not properly identified by the Company until December 2010. As a result, the Company determined that the previously issued interim financial statements for fiscal year 2010 should no longer be relied upon, which resulted in the restatement of the interim financial statements for the interim periods ending December 31, 2009, and March 31, 2010. The Company plans to file restated interim financial statements for the interim period ending June 30, 2010. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Accounting for Derivative Financial Instruments: Management has identified a material weakness related to accounting for embedded derivatives included in certain convertible notes payable that were outstanding when ASC 815-40-15 became effective for the Company on October 1, 2009. When the Company first assessed the impacts of ASC 815-40-15, management erred in its conclusion that certain embedded derivatives met the scope exceptions of ASC 815-40-15 and did not require adjustments to its accounting. The Company lacked a technical review process which might have enabled the Company to identify the error and prevent a misstatement of the Company’s interim financial statements. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Accounting for Direct-Response Advertising Costs: Management has identified a material weakness related to the classification and measurement of our capitalized direct-response advertising costs due to the following: |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The Company had not previously defined what constituted a “separate stand-alone cost pool” as defined by ASC 340-20-35-1. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The amortization of capitalized direct-response advertising costs was not calculated by taking the ratio of current period revenues over the total period revenues associated with each cost pool as required by ASC 340-20-35-3. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | Prior to September 30, 2010, the Company had reflected both a current and long term portion of the assets on the consolidated balance sheet. In accordance with an SEC interpretation (SPCH.T.1995.22.Glynn), the SEC would object to the classification of any unamortized cost of advertising as a current asset. This resulted in the Company reclassifying the fiscal year 2009 comparative balance to conform to the current fiscal year classification. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Documentation of Accounting Review and Approval Process: In connection with the audit of our consolidated financial statements for the fiscal year ended September 30, 2010, our independent registered accounting firm reported to our Board of Directors that they observed inadequate documented review and approval of certain aspects of the accounting process including the documented review of accounting reconciliations and journal entries that they considered to be a material weakness in internal control. After a review of our current review and approval of certain aspects of the accounting process, management concluded that the inadequate documented review and approval process represented a material weakness. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Subscribe to an outside service that provides the Company’s Chief Financial Officer and Controller with timely guidance on Recently Issued Accounting Pronouncements. In addition, the Company intends to supplement its current interim and annual financial reporting processes with documentation of the Controller’s and Chief Financial Officer’s review and assessment of the timing and impacts, if any, that the new accounting pronouncements will have on the Company’s financial statements; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Engage outside experts, as needed, to provide counsel and guidance on non-routine technical accounting issues that can be associated with future financial instruments. The Company has determined that it is not economically feasible for the Company to maintain the required expertise internally due to the limited number of complex transactions that the Company may undertake and the current size of the Company. As the Company continues to grow, management will continually re-assess its staffing levels, particularly within the accounting and finance areas, required to maintain effective internal controls over financial reporting. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Document all significant accounting policies and ensure that the accounting policies are in accordance with accounting principles generally accepted in the United States and that internal controls are designed effectively to ensure that the financial information is properly reported. Management will engage independent accounting specialists to ensure that there is an independent verification of the accounting positions taken. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In connection with the reported inadequate documented review and approval of certain aspects of the accounting process, management has plans to review the current review and approval processes and implement changes to ensure that all accounting reconciliations and journal entries are reviewed and approved on a timely basis and that this review is documented by a member of management separate from the preparer. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | PART II — OTHER INFORMATION |
|--------|-----------------------------------|

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| /s/ LIBERATOR MEDICAL HOLDINGS, INC. |
|--------------------------------------|
| Registrant                           |
|                                 |   |   |   |   |
| /s/ Mark A. Libratore                |   | President |   | April 13, 2011 |
| Mark A. Libratore                    |   |   |   |   |
|                                 |   |   |   |   |
| /s/ Robert J. Davis                  |   | Chief Financial Officer |   | April 13, 2011 |
| Robert J. Davis                      |   |   |   |   |

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