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To: Walter Morton who wrote (15)	6/28/1999 7:21:00 PM
From: Walter Morton	Read Replies (1) \| Respond to of 92

"At June 1, 1999, there were 109,174,552 shares of Common Stock outstanding,which were held by approximately 660 shareholders of record... "Subsequent to year end, on June 25, 1999, the Company issued 300 shares ofSeries B Convertible Preferred Stock, par value $.001 ("Series B stock") for cash at $10,000 per share to one institutional investor for gross proceeds of $3,000,000. Dividends of 7% per annum are payable, with certain exceptions, either in cash or in shares of Common Stock, at the election of the Company. The stated dollar amount of Series B stock is convertible into fully paid and nonassessable shares of Common Stock of the Company at a conversion price which is the lower of (i) $2.00 per share or (ii) a per share amount computed on each of two adjustment dates (30 and 60 days after registration of the underlying shares), but not less than $1.50 per share except as may be subsequentlymodified as a consequence of certain possible penalties and other adjustmentsrelated to the Company's failure to file a registration statement on a timelybasis or have the registration statement declared effective within 180 days. Theconversion price on the two adjustment dates is computed at a premium to theaverage of the three lowest of the ten day closing bid market prices prior toand including each adjustment date. The Series B stock shall be subject toautomatic conversion on June 24, 2002, subject to certain conditions.The Series B Preferred Stock is redeemable in certain instances at the Company'soption and at the holder's election upon the occurrence of certain triggeringevents including, without limitations, failure to register the underlying shareswithin 180 days or a lapse of a registration statement for ten non-consecutivetrading days and certain other events. The redemption price upon such electionfollowing a triggering event shall be the greater of (a) 110% of the statedvalue or (b) the product of the number of preferred shares multiplied by theclosing market price, multiplied by the stated value per share, divided by thethen conversion price per share. In addition, certain recently converted ofCommon Stock are subject to repurchase upon a triggering redemption.The Company also issued to the purchaser of Series B stock warrants to purchase195,000 shares of Common Stock at $2.40 per share until June 24, 2004. Inconnection with the financing the Company incurred placement agent fees andlegal and related costs of approximately $250,000 and issued a warrant topurchase 137,615 common shares at $3.27 per share until June 24, 2004 as aplacement agent fee to Jesup & Lamont Securities Corporation in connection withthe offering. The Company intends to use the net proceeds of approximately$2,750,000 for general corporate purposes... "Stock options, warrants, securednotes payable, redeemable convertible preferred stock and prepaid warrantsexercisable into 29,011,591 shares of common stock were outstanding as at March31, 1999 and stock options, warrants and prepaid warrants exercisable into41,084,409 shares of common stock were outstanding as at March 31, 1998. Thesesecurities were not included in the computation of diluted earnings (loss) pershare because of the losses, but could potentially dilute earnings (loss) per share in future years." 6/28/99 10-K