LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

9 Months Ended

Sep. 30, 2013

Liabilities Assigned To Liability Purchase Agreement

LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

10.          LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

During the nine months ended September 30, 2013, the Company negotiated a liabilities purchase agreement (“LPA”) with Southridge Partners II, LP (“Southridge”). The LPA takes advantage of a provision in the Securities Act of 1933, Section 3(a)(10), that allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding. The process, approved by the court in August 2013, has the potential to eliminate nearly $2.1 million of our financial obligations to existing creditors who agreed to participate and executed claims purchase agreements with Southridge’s affiliate ASC Recap, LLC (“ASC Recap”) accounting for $2,093,303 of existing payables, accrued expenses and other current liabilities, and notes payable. The process began with the issuance in September 2013 of 1,618,235 shares of its common stock to ASC Recap, however at September 30, 2013, no creditors had yet been paid from the proceeds.

There can be no assurance that CTI will be successful in completing this process with Southridge, and the Company retains ultimate responsibility for this debt, until fully paid.