Common Stock equal to 100% of the number of shares that the purchaser may initially acquire upon conversion of the Notes, at an initial exercise price of $0.30 per share, subject to adjustment for certain issuances and events that will result in dilution.

We also will issue to purchasers of the Notes who purchased shares of our Preferred Stock, a number of additional shares of our Common Stock upon conversion of the Preferred Stock, based upon the principal amount of Notes purchased relative to the total purchase price of the shares of Preferred Stock purchased, which will effectively reduce the per share conversion price of the Preferred Stock so that it is the same as the conversion price per share of the Notes, or to the extent purchasers have converted shares of Preferred Stock, but not sold the Common Stock received upon conversion, we will issue a number of additional shares of Common Stock that will provide equivalent value, in each case without additional consideration. If we redeem the Notes but do not redeem the Preferred Stock by September 30, 2006, then commencing on October 1, 2006, the conversion price of outstanding shares of Preferred Stock of purchasers of the Notes will be reduced to the lesser of the Fixed Conversion Price and the Floating Conversion Price, to the extent of the total purchase price paid by the purchaser for the Notes in relation to the total purchase price paid for the Preferred Stock. We also will reduce to $0.30 the per share exercise price of warrants purchasers of the Notes received with their purchase of Preferred Stock, to the extent of the principal amount of Notes purchased relative to the total purchase price for the shares of Preferred Stock, subject to our right, after the registration statement referred to below under the heading “Registration of Shares” has become effective, to force the exercise of those warrants on 20 days’ notice by offering to purchase those warrants for a nominal price if the closing market price per share of the Common Stock exceeds $0.45 for ten consecutive trading days. We also will issue warrants to purchase a number of additional shares of our Common Stock at $0.15 that will provide equivalent value to those purchasers of Notes who have sold or otherwise disposed of shares of Preferred Stock.

Registration of Shares

We have agreed to file a registration statement to register for resale the shares of our Common Stock that purchasers of Notes may acquire upon conversion of the Notes and or exercise of the Warrants, as well as any additional shares of Common Stock which may be issued as part of the offering. If we fail to file a registration statement for the resale of these shares by August 21, 2006, or the registration statement is not effective by the 150th day after the Initial Closing, we will be obligated to pay purchasers of the Notes liquidated damages in an amount equal to 2% of the principal amount of the Notes for each month, or portion of a month, for which we fail to timely file the registration statement or until the registration statement becomes effective, but in no event may the liquidated damages exceed 18% of the principal amount of the Notes. As a condition to their purchase of the Notes, purchasers will be required to enter into agreement with us that they will not sell, transfer or otherwise dispose of any of our securities prior to the 150th day after the Initial Closing, except that the restrictive period applicable to shares of Common Stock that were acquired, or may be acquired, upon conversion of shares of Preferred Stock, will terminate on August 20, 2006 to the extent of the total purchase price paid by the purchaser for Notes in relation to the total purchase price paid for the Preferred Stock.

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