As previously disclosed in our Current Report on Form 8-K filed January 31, 2008, we issued warrants to purchase 4,912,988 shares of our common stock at $0.30 per share (the "2008 Warrants") in connection with a private offering of common stock and warrants closed on January 31, 2008. As disclosed in our current report on Form 8-K filed March 17, 2009, we have previously agreed to extend the termination date for the 2008 Warrants from January 11, 2009 to January 11, 2010.

As disclosed in our Current Report filed July 10, 2009, on July 10, 2009 we closed a private offering of Units sold at a price of $0.05 per Unit, each Unit consisting of one share of common stock, par value $0.001, and one warrant to purchase one share of common stock at a price of $0.10, exercisable for three
(3) years

The terms of the 2008 Warrants provide, among other things, that subsequent sales of stock at a price below the exercise price of the 2008 Warrants will cause the number of shares to be issued upon the exercise of the 2008 Warrants to increase and the exercise price of the 2008 Warrants to decrease. Therefore, as a result of the private offering closed July 10, 2009, the number of shares to be issued upon the exercise of the 2008 Warrants automatically increased and the exercise price of the 2008 Warrants automatically decreased.

In order to maintain our financial flexibility, we have negotiated with the holders of the 2008 Warrants and have reached a Warrant Surrender Agreement under which a portion of the newly-increased number of 2008 Warrants are surrendered and under which the newly-decreased exercise price of the 2008 Warrants is increased. In exchange for this consideration from the holders of the 2008 Warrants, the termination date of the 2008 Warrants is extended to the later of (a) the expiration date of the warrants which are a part of the Units issued on July 10, 2009, as such expiration date may be modified from time to time, and (b) July 10, 2012.

As a result of the Warrant Surrender Agreement, the exercise price of the 2008 Warrants has been adjusted to $0.10 per share. As a result of the Warrant Surrender Agreement, the number of 2008 Warrants held by each holder of 2008 Warrants is now as follows:

        2008 Warrant       Number of Shares That Can Be Purchased Upon
        Holder             Exercise Of Holder's Remaining 2008 Warrants
        Arclight Capital   5,000,000
        LLC
        Spectra Capital    5,000,000
        Management LLC
        Geld Art           500,000
        John Mignacca      500,000
        William Anderson   357,143
        Frank Cantore      300,000
        Luigi Tescolin     254,900
        Anna Giglio        250,000
        Claude Hambel      147,570
        Mario Discepola    100,000
        Christian Radu     90,000

The largest holders of the 2008 Warrants, Arclight Capital, LLC and Spectra Capital Management, LLC, have executed the Warrant Surrender Agreement. Signatures from the remaining smaller holders of the 2008 Warrants are being gathered at this time.

Except as modified by the Warrant Surrender Agreement, the terms of the 2008 Warrants remain in full force and effect.