SUBSEQUENT EVENTS

Issuance of Warrants

In connection with the Second Amendment to the Credit Agreement (see Note 2), the Company granted the lenders warrants to purchase an aggregate amount equal to 19.9% of the shares of common stock of the Company, calculated on a fully-diluted basis at the time of exercise. In effect, the lenders shall have the right to purchase 19.9% of the common stock of the Company, as determined on the exercise date, until the warrants are exercised in full.

The exercise price of the each warrant is $0.40 per share and may be exercised at any time through June 6, 2018. Warrants are not exercisable to the extent (but only to the extent) that the warrant holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock, unless the warrant holder provides sixty (60) days' prior written notice to the Company.

Under the terms of the warrants, except for certain transactions, should the Company enter into any of the following transactions, any successor entity must assume all obligations of the Company under the warrant agreement (each a "Fundamental Transaction"):


•	consolidate or merge with or into any other person; or


•	dispose of all or substantially all of its respective properties or assets to any other person; or


•	allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Company; or


•	consummate a stock or share purchase agreement or other business combination with any other Person whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Company; or


•	reorganize, recapitalize or reclassify the common stock of the Company.

Notwithstanding the above, in connection with the closing of a Fundamental Transaction, the Company may require the holder to exercise its warrants immediately prior to the closing of said Fundamental Transaction.

Host Agreement Amendments

On May 31, 2012, the Company entered into the Eighth Amendment to the Master Lease Agreement, dated as of June 8, 2007, as amended, by and between the Company and Wal-Mart Stores East, LP, a Delaware limited partnership, Wal-Mart Stores, Inc., a Delaware Corporation, Wal-Mart Louisiana, LLC, a Delaware limited liability company, Wal-Mart Stores Texas, LLC, a Texas limited partnership, and Wal-Mart Stores Arkansas, LLC, an Arkansas Limited Liability Company (collectively "Walmart"). Among other items, this amendment provides that the Company will delay lease payments due to Walmart on June 10, 2012 and July 10, 2012 until December 10, 2012 and, subject to the Company's satisfaction of certain conditions and covenants, lease payments due to Walmart on June 10, 2013 and July 10, 2013 until December 10, 2013. The Company will pay interest on the delayed payments at a rate of 9% annually.

Effective May 18, 2012, as executed on June 4, 2012, the Company entered into the 2nd Amendment to the License Agreement dated as of January 1, 2009, as amended, by and between Consumer Programs Incorporated, a subsidiary of Company, and Sears, Roebuck and Co., a New York corporation and CPI Corp.. Among other items, this amendment provides that the Company will delay payment of certain fees related to the reduction of store hours for the first, second and third quarters of 2012 until December 5, 2012. The Company will pay interest on the delayed payments at a rate of 1% per month. In connection with this amendment, the Company also entered into a letter agreement with Sears on June 5, 2012 that transfered 200,000 shares of the common stock of the Company to Sears in a private placement.

Asset Impairment

As a result of the Second Amendment (see Note 2), the Company made the determination to consider an offer from a third-party for the purchase of the Matthews, North Carolina property (see Note 4) for a purchase price of approximately $2.5 million, which would result in an impairment loss of approximately $450,000 during the second quarter of fiscal 2012.