The following Warrant Holders, each an institutional investor, exercised outstanding 2006 Warrants as described above: (i) Special Situations Fund III QP, L.P., (ii) Special Situations Private Equity Fund, L.P., (iii) Special Situations Technology Fund, L.P., and (iv) Special Situations Technology Fund II, L.P.. The controlling principals of the Warrant Holders beneficially own approximately 12% percent of the Company's outstanding common stock following exercise of the 2006 Warrants.

On February 4, 2011, in consideration of the Warrant Holders exercising the 2006 Warrants at an exercise price above the current market price of the Company's common stock, the Company issued to the Warrant Holders new warrants exercisable for an aggregate of 1,627,945 shares of common stock at an exercise price of $2.67 per share (the "2011 Warrants"). The 2011 Warrants are exercisable from August 4, 2011 through February 4, 2016. The 2011 Warrants contain provisions which would adjust the exercise price, and in inverse proportion adjust the number of shares subject to the 2011 Warrants, in the event the Company pays stock dividends, effects stock splits or completes other transactions specified in the 2011 Warrants.

The Company also entered into a Registration Rights Agreement with the Warrant Holders, pursuant to which the Company agreed to prepare and file, within 30 days following the issuance of the 2011 Warrants, a registration statement covering the resale of the shares of common stock issuable upon exercise of the 2011 Warrants. If the registration statement is not declared effective within 90 days following the date of issuance of the securities, or the Warrant Holders are otherwise unable to re-sell the shares purchased upon exercise of the 2011 Warrants, the Company will be obligated to pay liquidated damages to the purchasers in the amount of $0.01335 per day per applicable share until 180 days after the date the registration statement is required to be filed, and $0.0267 per day per applicable share thereafter, but not to exceed a total of $0.534 per applicable share.

The Company offered and sold the 2006 Warrants and the 2011 Warrants without registration under the Securities Act of 1933, as amended (the "Act"), to a limited number of qualified institutional buyers and other accredited investors in reliance upon the exemption provided by Rule 506 of Regulation D thereunder. The 2011 Warrants may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Act. An appropriate legend has been placed on the 2011 Warrants issued, and will be placed on the shares issuable upon exercise of the 2011 Warrants, unless registered under the Act prior to issuance.

No general solicitation or advertising was made in connection with the offer or sale of the 2011 Warrants. Each of the Investors is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Act. The Company did not pay any placement agent fees or other commissions to third parties in connection with the sale of the 2011 Warrants.