"On March 15, 2001, we entered into a private placement transaction with Elliott Associates, L.P. and Elliott International, L.P. pursuant to a
securities purchase agreement. In connection with the private placement, we issued an aggregate of $3 million in principal amount of 7% convertible
debentures due December 31, 2001 and warrants to purchase up to 300,000 shares of our common stock (after accounting for the 3-for-1 stock
split which became effective as of March 21, 2001) for an aggregate purchase price of $3 million. The debentures are convertible into common
stock at a conversion price of $6.83. We are required to repay $1 million in principal amount of the debentures in the aggregate per month
beginning on the second full calendar month following the effective date of the registration statement of which this prospectus forms a part. The
repayments are payable in cash in an amount equal to $1,050,000 or payable in shares of common stock by dividing the principal amount being
repaid by a stock repayment rate equal to the lesser of (i) the conversion price and (ii) 90% of the ten lowest closing prices of our common stock
during the 22 trading days preceding the repayment date. The purchasers have a right to convert any monthly amount due, which would otherwise
be payable in common stock, based upon a market price similar to the stock repayment rate. The warrants are exercisable from March 15, 2001
through March 15, 2004 at an exercise price equal to $7.66 (subject to certain adjustments). In connection with the private placement, we entered
into a registration rights agreement with the purchasers, pursuant to which we are registering 200% of the number of shares of common stock
currently underlying the debentures and the shares underlying the warrants. The purchasers are entitled to certain liquidated damages and
redemption rights in connection with certain defaults under the registration rights agreement.
We have agreed to initially register 10,615,884 shares for resale by the selling stockholders. Of those shares, up to 2,000,256 being offered by
the selling stockholders were or will be acquired from us as follows:
Debentures--883,170 shares upon conversion of 7% convertible debentures issued in the aggregate principal amount of $3 million in a
private placement pursuant to a securities purchase agreement dated March 15, 2001.
Warrants--300,000 shares upon exercise of warrants issued in a private placement pursuant to a securities purchase agreement dated March
15, 2001; 600,000 shares upon exercise of warrants issued pursuant to a space lease agreement in November, 2000; 150,000 shares upon
exercise of warrants issued pursuant to a release agreement dated September, 2000, and 67,500 shares upon exercise of warrants issued
pursuant to a securities purchase agreement dated February 2000. |
