Current holders of the Companys 1,600,000 warrants issued in February, 2001 exercised all their warrants in connection with a re-pricing offer of $0.70 per share as more fully described in an amendment to the S-3 registration statement. The re-pricing offer included the grant of one new warrant priced at $0.77 per share for each warrant exercised. The convertible debt has a term of 12 months, is secured by assets of the Company and is convertible into the Companys common shares at $1.25 per share. Investors were also granted 4,000,000 warrants with an exercise price of $0.77 per share. The new financing proceeds are exclusive of expenses estimated to be $70,000. Based on current revenue levels this additional financing is sufficient to fund the Companys operations for the next year. After one year the Company will be required to repay the $2,000,000 loan with new debt or equity financing or convert the loan to equity at the option of the loan investors. The Company can make no assurances that such new financing will be available at acceptable terms or at all.
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