On September 25, 2012, the Company extinguished $2,400,000 principal amount of outstanding convertible promissory notes in exchange for $880,000 in cash and 1,000,000 newly-issued shares of the Company’s common stock. The Company accounted for this transaction as a troubled debt restructuring in accordance with Accounting Standards Codification 470-60, “Troubled Debt Restructurings by Debtors”. The Company recognized a gain on debt restructuring of $1,048,000, or $0.05 per share, representing the excess of the carrying amount of the notes and accrued interest thereon, over the fair value of the cash and common stock issued.

Also in September 2012, certain accounts payable vendors and service providers agreed to accept payments less than the outstanding balance owed to them. For the year ended December 31, 2012, the Company recognized a gain from vendor concessions of $154,000 which is included in selling, general and administrative expense and caused basic and diluted loss per share for the year ended December 31, 2012 to decrease by $0.01.