On October 31, 2011, the landlord over premises leased by the Company exercised its right under the lease to draw down the full amount of a letter of credit in the amount of $428,000 that the Company had posted as security under the terms of the lease.  The letter of credit was issued for the benefit of the Company by an unaffiliated lending institution and the Company had partially collateralized the letter of credit in the approximate amount of $238,000 by depositing this amount as restricted cash in a money market account with the lending institution.  The Company currently does not have funds available to repay the issuer of the letter of credit for the difference between the full amount of the letter of credit and the amount of the collateral, which difference is approximately $190,000.  While the Company’s failure to make this payment constitutes an event of default under the terms of the letter of credit, the Company has not received a default notice from the lending institution.  

Although the lending institution has indicated its willingness to negotiate a payment arrangement on terms that are acceptable to the Company and has not taken any action against the Company at this time, there can be no assurance that the Company will be successful in negotiating acceptable payment terms with the lending institution or that the lending institution will not declare the Company in default of the letter of credit agreement in the future.