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The increase in cash and cash equivalents primarily relates to the receipt of approximately 2,720,000 of net proceeds from the October 27, 2000 private placement. As of December 31, 2000, we had total current liabilities of 17,296,000, 6,003,000 of which consisted of accounts payable to vendors. Further, as of December 31, 2000, we had a working capital deficit of 11,141,000, and an accumulated deficit of 41,358,000. We estimate that, based on the current rate of negative cash flow from operations, the cash and that available under the revolving credit line as of April 9, 2001 (approximately 545,000) will be sufficient to provide a source of working capital through approximately June 15, 2001, the date on which 1,750,000 becomes due and payable to our bank. However, this estimate only gives effect to certain payments to vendors to reduce outstanding accounts payable.

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